What is a market maker? Rights and duties of a market maker in Vietnam

What is a market maker? Rights and duties of a market maker in Vietnam (Internet image)

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

1. What is a market maker?

According to Clause 1, Article 3 of Decree 95/2018/ND-CP, a market maker refers to an organization appointed by the Ministry of Finance to exercise and perform its rights and duties in the issuance and trading of government debt instruments in domestic market in accordance with regulations in Decree 95/2018/ND-CP.

2. Rights and duties of a market maker in Vietnam

2.1. Rights of a market maker in Vietnam

Specifically, in Clause 1, Article 27 of Decree 95/2018/ND-CP, a market maker shall have the following rights:

- Being the sole entity entitled to participate in issues, repurchases or swaps of government debt instruments by bidding;

- Being given priority in application for registration as a lead underwriter in each issue of government bonds or national development bonds through underwriting;

- Attending periodic exchanges about bond issuance and orientations for bond market development policies with the Ministry of Finance;

- Request the State Treasury to issue government bonds for ensuring the market liquidity as prescribed in Article 20 of Decree 95/2018/ND-CP;

- Being given priority in negotiation on repurchase or swap of government debt instruments according to the Ministry of Finance’s notification.

2.2. Duties of the market maker in Vietnam

According to Clause 2, Article 27 of Decree 95/2018/ND-CP, a market maker must discharge the following duties:

- Bid at bidding sessions for government debt instruments according to the Ministry of Finance's notification in each period;

- Annually purchase (including for customers) and trade in government debt instruments on the primary and secondary market with the quantity prescribed by Ministry of Finance in each period;

- Fulfill duties according to firm commitments to offer daily bid and ask prices of standard debt instruments according to the Ministry of Finance’s notification in each period.

- Make full payment for government debt instruments purchased on the agreed schedule;

- Submit annual reports and 6-month reports, made according to the Form No. 03 and Form No. 04 stated in the Appendix enclosed with Decree 95/2018/ND-CP.

Form No. 03

Form No. 04

3. Requirements for registration as a market maker in Vietnam

According to Clause 1, Article 26 of Decree 95/2018/ND-CP, eligibility requirements to be satisfied when applying for registration as a market maker include:

- The applicant must be a commercial bank or a securities company which is duly established and operates under the law of Vietnam;

- Its owner’s equity reported on duly audited financial statements of 03 years preceding the year in which application for registration as a market maker is submitted must be not lower than the minimum charter capital prescribed by relevant laws;

- It has operated for at least 03 years. If it is an acquiring enterprise or an enterprise formed from full or partial division or consolidation, its operating period shall include the operating period before the acquisition, full or partial division or consolidation.

- It has purchased and traded government debt instruments on the primary and secondary market with the quantity prescribed by Ministry of Finance in each period.

4. Cases of changes compulsorily reported to Ministry of Finance of Vietnam

Within 10 working days from the occurrence of any of the following changes, the market maker must inform the Ministry of Finance in writing:

- The market maker has its business license revoked or withdrawn.

- It is fully or partially divided, consolidated or merged, has its business type changed or its business suspended, is dissolved or declared bankrupt.

- It fails to achieve prudential indicators as regulated by relevant laws.

- Its business is put under a special control by a competent authority in accordance with applicable laws.

(Article 29 of Decree 95/2018/ND-CP)

Thanh Rin

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE