Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam

Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam (Internet image)

1. Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam

Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam according to Article 4 of Decree 158/2020/ND-CP are as follows:

- Securities companies and securities investment fund management companies (hereinafter referred to as “fund management company”) shall only trade derivatives after obtaining certificate of eligibility to trade derivatives from the State Securities Commission of Vietnam (“SSC”):

+ Securities companies may carry out one, several or all of derivative trading operations, including: derivative brokerage, derivative proprietary trading and derivative investment consulting;

+ Fund management companies may only provide derivative investment consulting.

- In order to be issued with certificate of eligibility to trade derivatives, a securities company is required to meet the following requirements:

+ Be sufficiently licensed to perform securities trading operations;

+ Meet the following charter capital and equity requirements:

++ For derivative brokerage: the minimum charter capital or equity is VND 800 billion;

++For derivative proprietary trading: the minimum charter capital or equity is VND 600 billion;

++ For derivative investment consulting: the minimum charter capital or equity is VND 250 billion;

++ If a securities company engages in all of derivative brokerage, derivative proprietary trading and derivative investment consulting, its minimum charter capital or equity is VND 800 billion;

- Meet internal control and risk management requirements for securities trading operations in accordance with regulations of law on operations of securities companies;

- Meet personnel requirements: Director (General Director), Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for each derivative trading operation must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;

- Maintain a working capital ratio of at least 220% in the last continuous 12 months; have sufficiently contributed to provisions as prescribed by law;

- Incur no loss in the last 02 years;

- Receive unqualified opinions from the accredited audit organizations for the latest audited annual financial statements and the latest reviewed mid-year financial statements (in case an application for certificate of eligibility to trade derivatives is submitted after June 30);

- It is not following procedures for reorganization, dissolution or bankruptcy; it is not subject to any decision on suspension of business operations issued by competent authorities.

- In order to be issued with certificate of eligibility to trade derivatives, a fund management company is required to meet the following requirements:

+ Maintain the charter capital or equity of at least VND 25 billion;

+ Arrange Director (General Director) and Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for derivative investment consulting who must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;

+ Meet the requirements in Points dd, e, g, h Clause 2 of Article 4 of Decree 158/2020/ND-CP.

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

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

- 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 this Article, 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 hereof.

- The derivative trading organization shall comply with regulations laid down in Clauses 6, 7 Article 7 hereof 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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