Circular No. 120/2020/TT-BTC transaction of listed shares on the securities trading system

CIRCULAR

On transaction of listed shares, registration of transactions and fund certificates, corporate bonds, covered warrants listed on the securities trading system

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Pursuant to the Law on Securities No. 54/2019/QH14 dated November 26, 2019;

Pursuant to the Government’s Decree No. 155/2020/ND-CP dated December 31, 2020 on elaboration of implementing a number of articles of the Law on Securities;

Pursuant to the Government’s Decree No. 872017/ND-CP dated July 26, 2017 defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the request of the Chairman of Vietnam State Securities Commission;

The Minister of Finance hereby promulgates the Circular on transaction of listed shares, registration of transactions and fund certificates, corporate bonds, covered warrants listed on the securities trading system.

             Article 1. Scope of regulation and subjects of application

1. This Circular regulates on transaction of listed shares, registration of transactions and fund certificates, corporate bonds, covered warrants listed on the securities trading system.

2. Subjects of application

a) Investors;

b) Securities companies, depository members, clearing members, securities investment fund management companies;

c) Vietnam Stock Exchange; Hanoi Stock Exchange, Ho Chi Minh City Stock Exchange (hereinafter referred to as the Stock Exchange);

d) The Vietnam Securities Depository and Clearing Corporation.

dd) Other relevant agencies, organizations and individuals.

             Article 2. Interpretation of terms

In this Circular, these terms are construed as follows:

1. Price fluctuation limit refers to the price fluctuation limit of securities setting in trading date which is calculated by percentage (%) compared with the preference price.

2. Circuit breaker is a mechanism to automatically suspend trading in a trading session when the stock price or stock index moves to the specified threshold in the securities trading system.

3. Preference price is the price determined by the Stock Exchange and used as the base for determining the highest price (ceiling price) and the lowest price (floor price) in the trading day.

4. Concentrated order matching method means the trading method whereby transactions are executed by the trading system on basis of matching securities buying and selling orders. The concentrated order matching method includes periodical order matching method and continuous order matching method.

5. Periodical order matching means a trading method performed in the securities trading system on the basis of matching buying and selling orders of securities at a specified time.

6. Continuous order matching means the transaction method performed on securities trading system on the basis of matching buying and selling orders of securities immediately at the moment the order entered into the securities trading system.

7. Agreement based trading method means the trading method whereby trading parties shall, through the trading member, carry out an agreement on requirements for trading on the securities trading system; or trading parties shall themselves deal and execute the trading and then, their trading results shall be entered into the securities trading system by the trading member.

8. Day trading is the act of buying and selling a securities number which has not yet possessed by the the investor with the same trading volume on the only one account within the same trading day.

9. Mandatory purchase transaction (buy in) means a transaction of buying securities in order to ensure that there is a sufficient quantity of securities to pay for transactions in shortage of securities according to the provisions of law.

10. Margin trading at a securities company (hereinafter referred to as margin trading) means a transaction of buying securities using loans of a securities company, in which the securities which obtained from this transaction and other securities in margin trading of investors are used as collateral for the above loan.

11. Short selling transaction with collateral (hereinafter referred to as secured short sale) means a transaction of selling securities which have been borrowed on the securities loan and loan providing system of the Vietnam Securities Depository and Clearing Corporation. The seller shall take the obligation to buy back the securities to repay the loan.

12. Securities waiting to be transferred are securities that the investor has successfully purchased on the trading system in previous days and are in process of completing ownership transfer procedures.

13. Securities trading in odd-lot means a transaction with a quantity of securities less than one trading unit.

Article 3. Organizations of securities trading

1. The Stock Exchange organizes securities trading according to the concentrated order matching method and agreement based trading method and the following principles:

a) The concentrated order matching method on the securities trading system must ensure the priority principle of price and time;

b) The agreement based trading method on the securities trading system is implemented on the principle that the parties to the transaction negotiate and agree on the transaction contents.

2. Securities specified in Clause 1, Article 1 of this Circular are traded on the securities trading system, excluding cases of ownership transfer outside the securities trading system in accordance with law provisions on registration, depository, clearing and settlement of securities trading. The Stock Exchange is allowed to organize mandatory purchase transaction (buy in) sessions through the securities trading systems.

3. The Vietnam Stock Exchange shall promulgate the securities trading regulations including the following basic contents: trading method; trading time; methods for determining preference price; securities price fluctuation limit; circuit breakers (if any); kinds of trading orders; change or cancellation of trading orders; confirmation or rejection of securities trading; trading suspension, partly termination or completely termination of a securities number transaction; publishing information of trading results and other relevant contents.

Article 4. Price fluctuation limit

1. The Stock Exchange shall, upon the State Securities Commission’s approval, define the price fluctuation limit.

2. In case it is necessary to stabilize the market, the State Securities Commission shall decide to adjust the price fluctuation limit and publish the information on the State Securities Commission’s portal.

Article 5. Circuit breaker

1. The Stock Exchange shall, upon the State Securities Commission’s approval, define the circuit breaker mechanism.

2. Based on the practical market conditions, the State Securities Commission shall decide to apply the circuit breaker mechanism or the circuit breaker mechanism combined with price fluctuation limit.

Article 6. Accounts for securities trading

1. The investor must open securities trading account at securities company which is transaction member to carry out trading in securities as prescribed in this Circular and is also responsible for providing sufficient and accurate information for customer identification during the course of opening securities trading account and comply with the following regulations:

a) During the time the securities clearing and settlement has not been implemented under the central clearing partner mechanism, the investor shall carry out securities transactions, and make payment for securities transactions via their account and securities depository accounts without having to open clearing margin accounts.

b) After the clearing and settlement for securities transactions under the central clearing partner mechanism has been implemented, the investor must have a clearing margin account at a clearing member prior to implementation stock exchange. In case the investor opens a clearing margin account at a clearing member who is a depository bank, the investor is only allowed to open a securities trading account at a trading member who is a clearing member or non-clearing member with a clearing trust contract, settlement with general clearing member which is the depository bank where the investor opens the clearing margin account.

2. The investor is allowed to open multiple securities trading accounts according to the principle that in each securities company, an investor is only allowed to open 1 securities trading account, except for the cases specified in Clauses 4, 5, 6, 7, 8 of this Article, Article 9, Article 10 and Article 11 of this Circular.

3. For each securities trading account, the investor is only allowed to open 01 clearing margin account at the clearing members.

4. The securities investment fund management company is allowed to open many trading accounts at each securities company in the following principles:

a) One (01) securities trading account is open to carry out its own securities trading activities;

b) Two (02) securities trading accounts are opened to manage investment items of entrusting investors, in which, one (01) account serves securities trading activities of domestic entrusting investors and another account serves securities trading activities of foreign entrusting investors;

c) Each investment fund, securities investment company managed by the fund management company may open 1 securities trading account in the name of the investment fund or securities investment company at each securities company.

5. Branches of foreign fund management companies in Vietnam are allowed to open 02 securities trading accounts at each securities company, of which 01 securities transaction account to perform transactions for themselves and 01 Securities trading account to perform transactions for foreign entrusting investors.

6. Securities companies may open securities trading accounts on the following principles:

a) Securities company licensed to carry out securities dealing operation and being a trading member of the Vietnam Stock Exchange is allowed to open only 01 dealing account for securities trading at the company itself, not to open any trading account securities transactions in other securities companies, except for the case specified at point d of this Clause.

b) In case a securities company has canceled its membership of the Vietnam Stock Exchange, the securities company may open a securities trading account at another securities company that is a trading member of the Vietnam Stock Exchange to process the remaining securities on the  dealing account.

c) Securities company is allowed to open 1 trading account to create market for listed securities, register for trading and 01 account to prevent risk of secured warrants at the company to perform transactions for these operations.

d) Securities company that is not a founder of exchange traded fund may open a securities trading account at a founder of the exchange traded fund. This account is used for exchange transactions of fund certificates exchanged from portfolios on the primary market, for transactions on the secondary market for structured securities and fund certificates exchanged from portfolios from exchange transaction, transactions of structured securities and fund certificates exchanged from portfolios on the secondary market to perform exchange transaction, not to perform other securities transactions.

dd) Other securities trading accounts as regulated by relevant law provisions.

7. Foreign securities trading organizations are allowed to open 02 securities trading accounts at each securities company as follows:

a) 01 securities trading account is opened to carry out self-trading activities;

b) 01 brokerage transaction account to conduct brokerage activities for other foreign investors.

8. An insurance enterprise is allowed to open 02 securities trading accounts at each securities company as follows:

a) 01 securities trading account for transactions from equity source. In case an insurance enterprise has a foreign investor owning more than 50% of the charter capital, securities transactions conducted on this account shall be governed by the law on foreign ownership in the stock market.

b) 01 securities trading account for transactions from domestic insurance premium revenues of insurance contract owner funds in accordance with the law provisions on insurance business. Securities trading on this account shall not be subjected to the law provisions on foreign ownership in the stock market.

9. Securities company is not allowed to use numbers of the closed securities trading account to open securities trading accounts for new customers.

Article 7. Securities trading

1. During the time the securities clearing and settlement has not been implemented under the central clearing partner mechanism, securities buying shall be conducted as follows:

a) Investors may place an order to buy securities only when they have sufficient money on their securities trading account, except for margin trading as prescribed in Article 9 of this Circular. In case investor opens a securities depository account at a depository bank and opens a securities trading account at a securities company, the investor may place orders to buy securities and the securities company may execute orders buying securities when there is a payment guarantee or the depository bank’s confirmation of the depository bank’s acceptance of the investor’s request for payment for securities transactions.

b) Securities company is responsible for monitoring securities balance, cash balance (except for the case where investors open depository accounts at a depository bank), check the validity and legality of transaction orders of investors.

2. After the clearing and settlement for securities transactions under the central clearing partner mechanism has been implemented, the securities purchase transaction shall be carried out as follows:

a) An investor placing a securities purchase order must have sufficient collateral assets at the clearing member in accordance with the law on securities registration, depository, clearing and settlement.

b) Securities company where investors open trading accounts are only allowed to enter orders into the securities trading system when the investors have met the requirements for clearing margin as prescribed and required by clearing members. In case investors open a trading account, a clearing margin account at a securities company and open a depository account at a depository bank, the securities company enters the order into the securities trading system when there is guarantee or confirmation of the depository bank of the investor’s fulfillment of the requirements of margin clearing and settlement on the basis of an agreement between the securities company and the depository bank.

c) The monitoring and confirmation of securities balance, cash balance prior to securities transactions shall comply with the laws provisions on clearing and settlement of securities transactions.

3. An investor only allowed to place a selling order for permitted trading securities already available on the investor’s depository account at the trading date, except for the following cases: founders of exchange traded fund are allowed to sell fund certificates exchanged from portfolios, sell structured securities when ensuring adequate fund certificates exchanged from portfolios, structured securities to exchange ahead of settlement due date as regulated by the Vietnam Securities Depository and Clearing Corporation; day trading as prescribed in Article 10 of this Circular; sell of securities waiting to be transferred.

Depending on the market situation, the State Securities Commission conducts activities to sell securities waiting to be transferred.

4. Investors are not allowed to place trading orders of a securities number for buying and selling at the same time in the same periodic matching, except for orders entered into the securities trading system at the previous trading session, not yet matched, but still valid.

5. Securities company is responsible for controlling the placing of buy and sell orders together in the same transaction session of periodical order matching by investors on trading accounts opened at their companies.

6. Foreign securities trading organizations are allowed to use brokerage trading accounts as specified at point b, Clause 7, Article 6 of this Circular to place buying and selling orders together for the same securities number in each order matching session (periodical or continuous) or agreement based transactions, but must ensure the principle that the buying and selling securities orders are not of the same foreign investor.

Article 8. Public company trades its own stocks

1. A public company that redeem its own stocks on the securities trading system must comply with the following provisions:

a) The public company must redeem its own shares in accordance with the information disclosed in accordance with the provisions of Clause 4, Article 37 of the Law on Securities.

b) Principles of public company on determining the price to redeem its own shares by the method of order matching or agreement shall be as follows:

- Redemption price ≤ preference price + (preference price x 50% of price fluctuation limit of stocks).

- Redemption volume: In each trading day, the total redemption volume must be at least 3% and maximum 10% of the trading volume registered with the State Securities Commission (redemption volume does not include volume of cancellation of these orders and regulations are exempt when the remaining redemption volume is less than 3%).

This rule applies until the public company completes a purchase of its own stocks for the volume registered with the State Securities Commission.

2. The public company that redeem its own stocks may sell stocks after redemption in accordance with Clause 7, Article 36 of the Law on Securities. Stocks selling on the securities trading system under the transaction regulations of the Vietnam Stocks Exchange or outside the system of the Stock Exchange in accordance with the law on registration, depository, clearing and settlement of securities transaction.

3. Except for the case specified in Clause 2 of this Article, a public company redeem its own stocks before January 01, 2021 shall sell redemption stocks by order matching or by agreement as follows:

- Sell price ≥ preference price - (preference price x 50% of price fluctuation limit of stocks).

- Selling volume: In each trading day, the total selling volume must be at least 3% and maximum 10% of the trading volume registered with the State Securities Commission (order volume does not include volume of cancellation of these orders and regulations are exempt when the remaining selling volume is less than 3%).

             Article 9. Margin trading

1. Before performing margin trading, an investor must sign a margin trading contract with a securities company authorized to provide services of provide loan for customers to buy securities in accordance with law provisions. Contract for margin trading is also contract for loans on margin trading account. The minimum margin trading contract must include the content of collateral for margin trading, the deadline for additional margin trading, and disposal of collateral for margin trading when investors do not make additional margin trading; settlement method when a dispute arises; clearly stating the risks, damages that may arise and the costs that customers must pay.

2. Foreign investor is not allowed to conduct margin trading.

3. The investor is allowed to open the only one (01) margin trading account at each securities company where the investor’s securities trading account is opened. Margin trading account is separate account or separately managed or shall be recorded as sub-item of the investor’s existing securities trading account. The securities company must record the investor’s margin trading account separately from that investor’s securities trading account and separately from margin trading account and securities trading account of other investors.

4. Securities permitted for margin trading are stocks listed, registered for trading, and fund certificates listed on the securities trading system and meeting the following basic criteria: listing, registration time for trading; capital size and business results of the issuing organization; liquidity and price fluctuation (if any); information transparency and other criteria in accordance with State Securities Commission regulations. The Stock Exchange publishes a list of securities eligible for margin trading or securities not eligible for margin trading on the basis of criteria provides by the State Securities Commission.

5. On the basis of the list of securities eligible for margin trading or securities not eligible for margin trading announced by the Stock Exchange, the securities company shall select a list of securities to perform margin trading at the company and disclose information in accordance with law provisions.

6. The investor is obliged to ensure initial margin rate, margin rate maintenance in accordance with the contract signed with securities company. When the margin ratio on the investor's margin trading account falls below the maintenance margin rate, the securities company shall issue an additional margin order. In which, securities that are not eligible for conducting margin trading shall not be used as collateral when determining initial margin rate and maintenance margin rate for margin trading. In case the investor fails to make the additional margin, securities company is entitled to sell collateral securities according to provisions stated in the contract for opening margin trading account. Before selling collateral securities, securities companies disclose information in accordance with law provisions and notify the results of the sale of collateral securities for investors to know and conduct their obligations of ownership report, disclosure of transaction information in accordance with law provisions (if any).

7. Securities company that fails to fulfill certain criteria on provide loan for customers to purchase securities must stop signing new or extent contracts for opening margin trading accounts, stop providing loans for conducting margin trading and submit written reports to the State Securities Commission within 48 hours since the aforesaid event occurred.

8. The State Securities Commission promulgates the regulations guiding margin trading activities at securities companies.

9. In case of need for market stabilization, the State Securities Commission is entitled to request to suspend margin trading at securities company .

Article 10. Day trading

1. Investor can conduct day trading after entered into day trading contract with securities company eligible to provide the service of securities loan. Day trading contract must include provisions allowing securities company to carry out loan and mandatory buy-in transactions for supporting settlement in case of deficiency of securities for transfer in accordance with law provisions on clearing and settlement of securities trading. Day-trading contract must clearly specify risks, damages and expenses may arise that the investor must pay.

2. Day trading must comply with the following principles:

a) The investor is allowed to open the only one (01) day trading account at each securities company where the investor’s securities trading account is opened. Day trading account is separate account or separately managed or shall be recorded as sub-item of the investor’s existing securities trading account. Securities company must separate day trading accounts from ordinary securities trading accounts and margin trading accounts (if any) of each investor;

b) Investors that conduct day trading must comply with the provisions in Clause 4, Article 7 of this Circular, and not allowed to perform day trading for odd-lot securities trading and agreement based trading;

c) Securities company is entitled to select types of securities in the list of listed securities, register of transactions eligible for margin trading to implement the day trading for the investor. The list of securities eligible for day trading must be publicized by the securities company on its website;

d) Investor shall place trading orders and ensure that total number of a securities in sell orders must be equal to total number of such securities in buy orders within a trading date and vice versa. In case total number of securities of conducted sell orders exceeds total number of securities of conducted buy orders or vice versa, securities company shall take the responsibility to pay the amount of shortage money or securities on behalf of the investor at the settlement date.

dd) Securities company must refuse to execute day trading orders of investors when it is unable to guarantee that there is enough money and securities for payment to transfer at the settlement date;

e) Investor shall compensate for damages and make payments to securities company for any arisen expenses relating to buy-in activities, securities loan or cash loan for settlement support in the event that such customer does not have enough money or securities for transfer in settlement date as stated in the day trading contract signed with securities company and in accordance with relevant laws;

g) Securities company is entitled to request investors to provide margins in cashes or securities before allowing such investor to conduct day trading;

h) In a trading day, the total transaction value of the day (determined on the total value of buying and selling made) in each securities company must not exceed a prescribed rate compared to the equity of the company. The number of securities for day trading at each securities company shall not exceed a given percentage compared with the volume of circulating securities. The above mentioned percentages shall comply with the State Securities Commission’s regulations.

3. Day trading activities must not be performed within a period of five (05) working days, prior to the last registration date to implement the rights for shareholders associated with securities number eligible for day trading.

4. In case of need for market stabilization, the State Securities Commission may request to suspend day trading activities.

5. Securities company that fails to fulfill certain criteria for providing the service of securities loan must immediately stop signing new or extent day trading contracts, stop allowing investors to conduct day trading activities and submit written reports to the State Securities Commission within 48 hours since the aforesaid event occurred.

6. Depending on the market situation, the State Securities Commission conducts the day trading activities. The State Securities Commission promulgates the regulation to guide day trading.

Article 11. Secured short sale transaction

1. Securities loan transaction contracts on the securities loan and lending system at the Vietnam Securities Depository and Clearing Corporation to conduct short sale transactions must contain at least a minimum content of collateral, loan interest rates, loan term, loan extension, collateral handling when investors fail to return securities, settlement methods when disputes arise, clearly stating risks, damages that may arise and costs.

2. An investor opens a secured short sale trading account at a securities company provided securities loan service, where the investor opens a trading account to conduct a secured short sale. Secured short sale account is separate account or shall be recorded as sub-item of the investor’s existing trading account. Securities company must separate the secured short sale account from margin trading account, day trading account and ordinary securities account of each investor.

3. Securities eligible in short sale transaction are stocks or fund certificates that have been listed or registered on the securities trading system and fulfilled requirements on listed or registered period; capital scale and operating results of the issuance organization; liquidity and price fluctuation (if any); transparency of information and other criteria as regulated by the State Securities Commission. The Stock Exchange shall publish the list of securities that are eligible for secured short sale or not eligible for secured short sales in accordance with regulations of the State Securities Commission.

4. The short sale transaction activities is not allowed to be conducted within a period of five (05) working days prior to the last registration date to exercise the rights of shareholders associated with the securities number to be traded in the secured short sale.

5. Depending on the market situation, the State Securities Commission conducts activities of secured shot sale. The State Securities Commission promulgates the regulation to guide the secured short sale transaction.

6. In cases where it is necessary to ensure the safety of the operation of the stock market, the State Securities Commission may require securities companies to suspend the conduct of the secured short sale transaction.

             Article 12. Market making transactions

1. Market making activities must comply with the following principles:

a) Trading members taking part in market making must honestly perform market-making functions with goodwill for the purpose of ensuring effective and stable operations of markets;

b) Depending on market conditions, trading members taking part in market making may list a two way quote or one way quote for the securities number that has registered as a market maker in accordance with the regulations of the Vietnam Stock Exchange and the market making contract. In case a securities number needs liquidity, market-making period, quote methods, limit of difference between the bid price and the asked price, price rate-of-change, maintenance period of quote and cases in which trading is suspended shall apply regulations of the Stock Exchange and market making contract (if any);

c)  Trading members taking part in market making shall only place limit orders for market making trading. Trading members taking part in market making can simultaneously conduct market making trading and self-trading provided that price principle must be ensured as stated in the regulations of the Vietnam Stock Exchange.

2. Trading members participating in the market making are entitled to quote prices in order to simultaneously buy and sell securities codes of which such members are assigned as market makers in the same order matching session. These transactions must be carried out on the market maker account.

3. The Stock Exchange shall, upon the State Securities Commission’s approval, establish and promulgate regulations on guidelines for market making activities.

4. The Vietnam Stock Exchange has the right to terminate or suspend the market making activities of trading members with respect to one or a number of securities in the event that trading members fail to fulfill their responsibilities and regulations of the Vietnam Stock Exchange and violation of the terms of the market creation contract (if any).

Article 13. Effect

This Circular takes effect on February 15, 2021 and replaces the Circular No. 203/2015/TT-BTC dated December 21, 2011 of the Minister of Finance providing guidance on securities trading.

             Article 14. Implementation organization

The State Securities Commission, Vietnam Stock Exchange, Hanoi Stock Exchange, Ho Chi Minh City Stock Exchange, Vietnam Securities Depository and Clearing Corporation, securities company, depository members, clearing members, securities investment fund management companies and other relevant organizations and individuals shall implement this Circular.

For the Minister of Finance

The Deputy Minister

Huynh Quang Hai