Guidance on voluntary termination of derivative trading operations in Vietnam

Guidance on voluntary termination of derivative trading operations in Vietnam (Internet image)

Regarding this issue, LawNet responded as follows:

1. Guidance on voluntary termination of derivative trading operations in Vietnam

Guidance on voluntary termination of derivative trading operations in Vietnam under Article 7 of Decree 158/2020/ND-CP is as follows:

- The derivative trading organization that wishes to terminate its derivative trading operations shall submit an application to SSC. The application consists of:

+ The application form made using Form No. 03 in the Appendix enclosed with Decree 158/2020/ND-CP;

Form No. 03

+ The resolution of the General Meeting of Shareholders, Board of Members or the owner’s decision on termination of derivative trading operations and approval for the plan for settlement of relevant issues;

+ The plan for settling unexpired derivative trading contracts, including the plan for settling accounts and margins of clients.

- A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SSC directly, by post or through the online public service system as regulated by the Minister of Finance.

- Within 05 business days from the receipt of the application, SSC shall request the applicant in writing to revise the application (if necessary).

- Within 07 business days from the receipt of the adequate and valid application, SSC shall give a written permission to follow procedures for voluntary termination of derivative trading operations. If an application is refused, SSC shall provide written reasons for such refusal.

- From the receipt of SSC’s permission to follow procedures for voluntary termination of derivative trading operations:

+ Within 24 hours, the derivative trading organization shall disclose information about the following of procedures for voluntary termination of derivative trading operations;

+ Within 05 business days, the securities company shall disclose information about the plan, time limit and roadmap for settling unexpired contracts and notify the plan to each client.

The time limit for settling unexpired contracts must include a minimum period of at least 45 days provided for clients to settle their positions and transfer margins to other accounts but shall not exceed 60 days from the date of information disclosure.

- While following procedures for termination of operations, the derivative trading organization shall:

+ On a monthly basis or at the request of SSC, submit reports and disclose information about its status and relevant activities; not sign new derivative trading contracts; terminate all derivative trading operations, except the cases specified in Points b, c, d of Clause 6 of Article 7 of Decree 158/2020/ND-CP;

+ With regard to unexpired derivative trading contracts, the securities company shall:

++ Only receive and execute clients’ orders for matched sale-purchase transactions; only receive additional margins from clients;

++ Determine account balances and close accounts for clients; liquidate positions and return margins to clients; reach agreements and transfer rights, responsibilities, obligations, accounts, margins and open positions of clients to the substitute derivative trading organization;

++ Conduct transactions at the request of VSDCC and SE to reduce clients’ positions;

+ Liquidate or close positions on proprietary trading accounts and market making accounts (if any), and ensure the priority in performing clients’ transactions over its own position-closing transactions;

+ Fully pay taxes, service prices, debts and other financial liabilities related to derivative trading operations (if any).

- Within 05 business days from the completion of procedures as prescribed in Clauses 5, 6 of Article 7 of Decree 158/2020/ND-CP, the derivative trading organization shall provide SSC with the following documents:

+ List of clients with adequate information about client identification, numbers of derivative trading accounts, and numbers of margin accounts, and list of margins and positions on each account; reasons for failure to close accounts (if any);

+ Record of transfer of all accounts and margins of clients to the substitute clearing member that is required to make certification on this record;

+ Decision to cancel membership of trading member/clearing member;

+ Certification of full payment of taxes, service prices, debts and other financial liabilities related to derivative trading operations.

- Within 05 business days from the receipt of the documents specified in Clause 7 of Article 7 of Decree 158/2020/ND-CP:

SSC shall revise the certificate of eligibility to trade derivatives (if one or some derivative trading operations are terminated) or issue a decision to revoke the certificate of eligibility to trade derivatives (if all derivative trading operations are terminated). If an application is refused, SSC shall provide written reasons for such refusal.

2. Regulations on compulsory termination of derivative trading operations in Vietnam

Regulations on compulsory termination of derivative trading operations under Article 8 of Decree 158/2020/ND-CP are as follows:

- The derivative trading organization is required to terminate derivative trading operations in the following cases:

+ It fails to rectify the causes of suspension of derivative trading operations by the end of suspension period;

+ It is dissolved, declared bankrupt, or has its operations suspended or its license for establishment and operation revoked; the organization established after full or partial division, consolidation or merger fails to meet one of the requirements in Clauses 2, 3 Article 4 of Decree 158/2020/ND-CP.

- Within 30 days from the day on which the derivative trading organization is determined to fall in one of the cases specified in Clause 1 of Article 8 of Decree 158/2020/ND-CP, SSC shall request the derivative trading organization in writing to follow procedures for termination of derivative trading operations.

- From the receipt of SSC’s request for compulsory termination of derivative trading operations, the derivative trading organization shall disclose information and send notification to clients as prescribed in Clause 5 Article 7 of Decree 158/2020/ND-CP.

- The derivative trading organization shall comply with regulations laid down in Clauses 6, 7 Article 7 of Decree 158/2020/ND-CP for following procedures for termination of derivative trading operations and send reports on results to SSC.

- Within 05 business days from the receipt of reports on termination of derivative trading operations, SSC shall revise the certificate of eligibility to trade derivatives (if one or some derivative trading operations are terminated) or issue a decision to revoke the certificate of eligibility to trade derivatives (if all derivative trading operations are terminated).

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