Derivatives traded on derivative market in Vietnam

Derivatives traded on derivative market in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Derivatives traded on derivative market in Vietnam

Article 14 of Decree 158/2020/ND-CP stipulates the derivatives traded on derivative market as follows:

- The following derivatives are traded on the derivative market:

+ Futures and listed options based on underlying assets which are securities, securities indexes or other assets prescribed by the Government upon which the derivative price is based;

+ Forward contracts and options traded by adopting put-through trading method based on underlying assets which are securities and securities indexes on SE.

- Derivatives traded on SE must bear the following contents:

+ Information about the underlying asset such as name, ticker symbol and other relevant information;

+ Information about the derivative, including: name and extent of the contract, trading method, position limit, trading time limit, maturity date, final settlement date, final trading date, listing date, payment method, bid increment, quotation unit, daily trading limit, method for determination of daily settlement price, final settlement price, reference price, and margin;

+ With regard to options, additional information about the type of option (call or put), style of option (the option is exercised only at the expiration date, or the option is exercised at any time before or at the expiration date), and exercise price must be also provided.

2. Regulations on listing of derivatives in Vietnam

Article 15 of Decree 158/2020/ND-CP stipulates the listing of derivatives in Vietnam as follows:

- SE shall cooperate with VSDCC to determine contents of derivatives as prescribed in Clause 2 Article 14 of Decree 158/2020/ND-CP;

Carry out listing and organize trading of derivatives after obtaining SSC’s approval as prescribed by law.

- SE shall delist derivatives in the following cases:

+ The derivative becomes due;

+ The underlying asset of the derivative has been delisted or has not been used as the underlying asset;

+ The derivative is delisted in other cases where the delisting is deemed necessary by SSC to protect investors' rights and interests.

- The delisting of derivatives as prescribed in Point b Clause 2 of Article 15 of Decree 158/2020/ND-CP must be approved by SSC.

3. Regulations on derivative investment in Vietnam

According to Article 16 of Decree 158/2020/ND-CP, regulations on the derivative investment are as follows:

- Entities are allowed to invest in derivatives on the derivative market, except cases where an entity is banned by a competent authority from performing activities related to securities and securities market for a fixed period

Or permanently due to commission of securities-related offences, and specific conditional investments as follows:

+ Securities companies shall invest in derivatives only after they have been issued by SSC with certificate of eligibility to conduct derivative proprietary trading;

+ Fund management companies shall only use trusted capital from their investment portfolio management to invest in derivatives for the purpose of preventing risks to list of securities they are holding;

And use capital sources of securities investment funds or securities investment companies to invest in derivatives for the purpose of risk prevention as prescribed by the law on securities investment funds.

Fund management companies shall not use their own capital, borrowed funds and other lawful funding sources to invest in derivatives;

+ Credit institutions and FBBs shall invest in derivatives only after obtaining written approval from SBV;

+ Insurers and branches of foreign insurers shall only invest in derivatives in accordance with regulations of law on insurance business;

+ State-owned economic groups, state-owned corporations and state-owned enterprises shall invest in derivatives only after obtaining permission from competent authorities in accordance with regulations of law on management and use of state capital in business operations of enterprises.

- In the course of investing in or trading derivatives, entities shall themselves be responsible for risks and comply with regulations of law, and avoid committing prohibited acts in accordance with regulations of law on securities and securities market.

Quoc Dat

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE