Circular 58/2021/TT-BTC guiding Decree 158/2020/ND-CP on derivatives and derivatives market

CIRCULAR

Guiding a number of articles of the Government’s Decree No. 158/2020/ND-CP of December 31, 2020, on derivatives and the derivatives market^[1]

Pursuant to the November 26, 2019 Law on Securities;

Pursuant to the Government’s Decree No. 158/2020/ND-CP of December 31, 2020, on derivatives and the derivatives market;

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

Pursuant to the Government’s Decree No. 87/2017/ND-CP of July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Chairperson of the State Securities Commission of Vietnam;

The Minister of Finance promulgates the Circular guiding a number of articles of the Government’s Decree No. 158/2020/ND-CP of December 31, 2020, on derivatives and the derivatives market.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular guides the Government’s Decree No. 158/2020/ND-CP of December 31, 2020, on derivatives and the derivatives market (below referred to as Decree No. 158/2020/ND-CP), regarding the following contents:

a/ Derivatives trading, clearing and payment activities, covering securities index futures contracts and government bond futures contracts;

b/ Operations of members of the Vietnam Exchange and the Vietnam Securities Depository and Clearing Corporation.

2. Subjects of application of this Circular include:

a/ The state management agency in charge of securities and the securities market;

b/ The Vietnam Exchange, Hanoi Stock Exchange, and Ho Chi Minh Stock Exchange;

c/ The Vietnam Securities Depository and Clearing Corporation;

d/ Derivatives business institutions, derivatives clearing and payment service providers, and payment banks;

dd/ Trading members, special trading members, market makers, and clearing members;

e/ Investors and affiliated institutions and individuals.

Article 2. Interpretation of terms

In addition to the terms interpreted in Decree No. 158/2020/ND-CP, in this Circular, the terms below are construed as follows:

1. Clearing means determination of positions and net payment obligations for parties to derivatives transactions.

2. Reciprocal trading means opening of a new long (or short) position in order to reduce the previously opened short (or long) position of derivatives of the same type, underlying assets and maturity date.

3. Payment price means an order-matching price of a futures contract transaction between investors via the trading system of the Hanoi Stock Exchange.

4. Day-end payment price means a price determined at the end of a trading day to calculate daily profits and losses of positions.

5. Final payment price means a price determined on the last trading day to determine the payment obligation upon the contract performance.

6. Value of clearing collaterals (below referred to as value of collaterals) includes balance of margin deposit accounts and value of margin securities portfolios determined according to regulations of the Vietnam Securities Depository and Clearing Corporation.

7. Brokerage client means an investor that conducts derivatives transactions through brokering operations of trading members.

8. Clearing and payment client means a non-clearing member or its/his/her brokerage client that has entrusted derivatives clearing and payment operations to a designated clearing member.

9. Open volume of a derivative at a time means the number of outstanding derivatives contracts at that time.

10. Margin making means putting down by an obligor of an amount of money or securities that is acceptable as margin to secure the obligation to pay for derivatives transactions.

11. Initial margin means an initial amount of money or securities put down before a derivatives transaction is conducted.

12. Margin level means a value or rate of margin that an obligor needs to put down for derivatives contracts expected to be performed or maintained for outstanding derivatives contracts.

13. Hedging margin means a margin value that an investor or a clearing member needs to put down to make up for the maximum potential loss of derivatives calculated according to scenarios of price fluctuation of underlying assets.

14. Spread margin for futures contracts means a margin value that investors or clearing members holding such futures contracts need to additionally put down to make up for potential losses as compared to the hedging margin value due to a disparity between price fluctuations of underlying assets and those of futures contracts.       

15. Margin for transfer of government bond futures contracts means a margin value that investors involved in the payment for execution of such contracts need to put down to make up for potential losses in case such investors have not enough money for payment or not enough government bonds for transfer.

16. Monetary margin ratio means proportion of the value of monetary collaterals to the total value of marginable assets.

17. Securities index futures contract (below referred to as index futures contract) means a futures contract based on underlying assets being securities indexes.

18. Government bond futures contract means a futures contract based on underlying assets being government bonds or based on bonds assumed to have some basic characteristics of government bonds.

19. Clearing and payment contract means a contract between a clearing member and the Vietnam Securities Depository and Clearing Corporation to carry out derivatives clearing and payment activities under the name of such clearing member with the Vietnam Securities Depository and Clearing Corporation.

20. Derivatives trading account means an account opened at a trading member to conduct derivatives transactions of clients.

21. Contract execution means transfer of underlying assets or transferrable assets and payment of money or payment of differences between day-end payment prices, payment prices and final payment prices by parties to a futures contract under the contract and regulations of the Vietnam Securities Depository and Clearing Corporation.

22. Positions under the name of a clearing member include positions of investors and position of such clearing member, specifically as follows:

a/ Positions in dealing and market making (if any) transactions of the clearing member;

b/ Positions of brokerage clients of the clearing member;

c/ Positions of clearing and payment clients.

23. Total trading account means a trading account of an investor on which long and short positions of the same futures contract (based on the same underlying assets and with the same month of maturity) are opened and maintained until a clearing member requests the Vietnam Securities Depository and Clearing Corporation to make counterparty clearing as agreed upon with or requested by the investor.

Chapter II

DERIVATIVES PRODUCTS

Article 3. Index futures contracts   

1. Underlying assets of index futures contracts are securities indexes designed by the Vietnam Exchange on the index formulation and management principles set out by the Vietnam Exchange after they are reported to and approved by the State Securities Commission of Vietnam.

2. Upon their maturity, index futures contracts shall be performed in the form of cash payment under regulations of the Vietnam Securities Depository and Clearing Corporation.

3. Index futures contract form shall be provided by the Vietnam Exchange after it is reported to and approved by the State Securities Commission of Vietnam.

Article 4. Government bond futures contracts

1. Underlying assets of government bond futures contracts are:

a/ Government bonds currently traded on the market; or,

b/ Bonds assumed to have some basic characteristics of government bonds. The State Securities Commission of Vietnam shall formulate basic characteristics of government bonds and design and report bonds assumed to have some basic characteristics of government bonds to the Ministry of Finance for approval before listing them.

2. Upon their maturity, government bond futures contracts shall be executed in the form of cash payment or transfer of underlying assets under regulations of the Vietnam Securities Depository and Clearing Corporation. Modes of payment must be stated before listing of government bonds.

3. Government bond futures contract form shall be provided by the Vietnam Exchange after it is reported to and approved by the State Securities Commission of Vietnam.

4. The Hanoi Stock Exchange shall coordinate with the Vietnam Securities Depository and Clearing Corporation in determining and publicizing on their websites the following contents:

a/ List of transferable government bonds, principles of determination and coefficient of transfer (for government bond futures contracts executed in the form of transfer of underlying assets);

b/ List of government bonds used to determine final payment prices, principles of determination and ratio of each bond on such list (for government bond futures contracts executed in the form of cash payment).

5. The determination and publicization of information on government bonds under Clause 4 of this Article must comply with regulations of the Vietnam Exchange and the Vietnam Securities Depository and Clearing Corporation. The Hanoi Stock Exchange shall coordinate with the Vietnam Securities Depository and Clearing Corporation in determining the final point of time for finalizing the list of transferable government bonds or list of government bonds to be used for determination of final payment prices. After that time, the Hanoi Stock Exchange and the Vietnam Securities Depository and Clearing Corporation may not adjust the aforesaid list of government bonds.

Chapter III

DERIVATIVES TRADING, CLEARING AND PAYMENT ACTIVITIES

Section 1

DERIVATIVES TRADING ACTIVITIES

Article 5. Derivatives transactions of investors

1. To trade in derivatives, an investor shall open a derivatives trading account at a trading member and open a clearing margin account (below referred to as margin account) at a clearing member designated by such trading member. In case the investor has opened an underlying securities trading account at a trading member, it/he/she may use such account to conduct derivatives transactions after opening the margin account.

2. Before placing trading orders, during the time of holding positions and upon executing contracts, investors shall put down margins at the request of clearing members. 

3. Investors shall ensure position limits on their trading accounts under regulations of the Vietnam Securities Depository and Clearing Corporation. In case of excess of a position limit, investors, clearing members and the Vietnam Securities Depository and Clearing Corporation shall take the following remedies:

a/ Investors shall conduct reciprocal transactions to reduce positions;

b/ Past a law-specified time limit, if investors fail to reduce positions, clearing members may execute reciprocal trading orders to partially or wholly close positions of such investors to keep them within position limits on accounts;

c/ In case clearing members fail to conduct reciprocal transactions to close positions of investors, the Vietnam Securities Depository and Clearing Corporation may request other clearing members to execute or may itself execute reciprocal trading orders to partially or wholly close positions of investors under the names of the clearing members.

4. Reciprocal transactions mentioned in Clause 3 of this Article shall be conducted under regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 6. Derivatives trading accounts of investors

1. Investors shall enter into contracts on opening of derivatives trading accounts with trading members. Foreign investors shall register securities trading codes in accordance with law before opening their derivatives trading accounts. Securities companies that possess certificates of eligibility for derivatives business but are not trading members may open trading accounts at trading members for investment in derivatives under this Circular.

2. Investors that are members of Boards of Directors, members of Members’ Councils, Chief Executive Officers, Chief Operations Officers, heads of sections, or staffs of trading members may only open their derivatives trading accounts for themselves at such trading members.

3. Except the cases specified in Clauses 4 and 5 of this Article, an investor may open more than one derivatives trading account on the principle that only 1 derivatives trading account may be opened at each trading member. For each derivatives trading account, an investor may open 1 margin account at a clearing member designated by a trading member under Clause 1, Article 10 of this Circular.

4. A securities investment fund management company may open more than one derivatives trading account at each trading member, specifically as follows:

a/ Two total trading accounts under the company’s name to manage investment portfolios for entrusting investors, of which one is for conducting derivatives transactions for domestic investors and the other is for conducting derivatives transactions for foreign investors;

b/ One derivatives trading account for each securities investment fund or investment company managed by the securities investment fund management company under the latter’s name.

5. A securities company established overseas may open 2 derivatives trading accounts at each trading member, specifically as follows:

a/ One derivatives trading account to carry out derivatives dealing activities;

b/ One total trading account to carry out derivatives brokerage activities for other foreign investors.

6. Registration of information on trading accounts and total trading accounts on the derivatives clearing and payment system shall be carried out under regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 7. Receipt and execution of trading orders, certification of trading results

1. Trading members shall receive and execute derivatives trading orders and certify derivatives trading results under Clauses 1, 2, 3, 5 and 7, Article 16 of the Minister of Finance’s Circular No. 121/2020/TT-BTC of December 31, 2020, providing the operation of securities companies, and revising or replacing documents (if any).

2. Trading members may only execute trading orders of clients when such orders fully contain information on client, trading day, time of order receipt, trading account, codes of derivatives to be traded, trading mode, type of orders, and trading volume and price under regulations of the Vietnam Securities Depository and Clearing Corporation.

3. Trading members shall refuse to receive orders of clients in the following cases:

a/ Such orders do not fully contain the information specified in Clause 2 of this Article;

b/ The clients have not yet fully put down margins, except reciprocal transactions; or,

c/ Such orders exceed the limits set in regulations of the Vietnam Exchange or make client positions on accounts exceed the position limits set in regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 8. Post-transaction correction of errors

1. The Vietnam Securities Depository and Clearing Corporation shall carry out post-transaction correction of errors in the following cases:

a/ Such transactions lack information on client accounts due to failure to update such information on the payment system;

b/ Position-closing transactions have the number of order-matching positions larger than that of reciprocal positions on accounts suspended from trading due to violations of regulations on margins, position limits and open volume limits of the Vietnam Securities Depository and Clearing Corporation.

2. Post-transaction correction of errors shall be carried out as follows:

a/ For the transaction errors specified at Point a, Clause 1 of this Article, the Vietnam Securities Depository and Clearing Corporation shall correct them to match proper accounts of clients after completely updating information on the system. In case by the time set by the Vietnam Securities Depository and Clearing Corporation, a clearing member still fails to update client information on the system, the Vietnam Securities Depository and Clearing Corporation shall correct transactions that lack account information to dealing accounts of such clearing member;

b/ For the transaction errors specified at Point b, Clause 1 of this Article, the Vietnam Securities Depository and Clearing Corporation shall correct them to match dealing accounts of clearing members.

3. For transaction errors not falling into the cases specified in Clause 1 of this Article, the Vietnam Securities Depository and Clearing Corporation shall consider and report solutions to the State Securities Commission of Vietnam for approval.

4. Parties to transactions shall take responsibility for their errors within the ambit of their powers and responsibilities. Clearing members shall take responsibility for transaction errors of their clients, including also transactions of non-clearing members and clients of non-clearing members (for general clearing members).

5. After the post-transaction correction of errors, if clearing members become insolvent, they may use the support sources specified in Clause 2, Article 15 of this Circular.

6. Dossiers, order and procedures for post-transaction correction of errors must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Section 2

DERIVATIVES CLEARING AND PAYMENT ACTIVITIES

Article 9. Principles of payment of derivatives transactions for investors

1. Payment of derivatives transactions for investors includes payment of position profits and losses and payment upon contract execution, specifically as follows:

a/ In case of payment of position profits and losses:

- On trading days before the last trading day, the value of payments for position profits and losses shall be determined on a daily basis based on positions opened on trading accounts of investors and the difference between the day-end payment price and the day-end payment price of the preceding trading day, or the difference between the day-end payment price and the payment price (for positions opened on the day), or the difference between the payment price and the day-end payment price of the preceding trading day (in case of premature closing of positions), or the difference between the payment price of position closing and that of position opening (in case of position opening and closing on the same trading day);

- On the last trading day, the value of payments for position profits and losses shall be determined on the basis of positions opened on trading accounts of investors and the difference between the final payment price and the day-end payment price of the preceding trading day, or the difference between the final payment price and the payment price (for positions just opened on the day), or the difference between the payment price and the day-end payment price of the preceding trading day (in case of premature closing of positions), or the difference between the payment price of position closing and that of position opening (in case of position opening and closing on the same last trading day).

Day-end payment prices and final payment prices shall be announced on the website of the Vietnam Securities Depository and Clearing Corporation;

b/ In case of payment upon contract performance:

- For contracts for which cash payment is made: Their execution shall be completed upon completion of payment for position profits and losses of the last trading day.

- For contracts for which payment is made in the form of transfer of underlying assets: Their execution shall be completed when sellers’ investors are obliged to transfer underlying assets or transferable assets under regulations and buyers’ investors are obliged to make cash payment under the contracts and regulations of the Vietnam Securities Depository and Clearing Corporation; or when investors completely pay compensations (if any) under Point c, Clause 4, Article 11 of this Circular.

2. Payment shall be made on margin deposit accounts or margin securities accounts of investors. Payment activities shall be carried out by the Vietnam Securities Depository and Clearing Corporation in coordination with clearing members under Clauses 3 and 4, Article 11 of this Circular.

Article 10. Margin accounts of investors

1. Clearing members shall open margin deposit accounts for investors under the former’s names and separately manage margin deposits of investors under Point a, Clause 4, Article 34 of Decree No. 158/2020/ND-CP. Clearing members may use margin deposit accounts of investors under Clause 2 of this Article.

A clearing member shall open 1 margin securities account for each investor in order to manage the position, margin-making obligation, clearing collateral and transferable assets and make payment for the position on the investor’s trading account. A non-clearing member or brokerage client of a non-clearing member shall open a margin securities account at 1 general clearing member.

2. Margin deposit accounts and margin securities accounts of investors may only be used for the following activities:

a/ Receipt and refund of collaterals to investors;

b/ Receipt of interests or payment of losses on a daily basis from investors’ positions; making of payments upon contract execution; receipt of interests (if any) on margin deposits at banks;

c/ Receipt or transfer of underlying assets and transferable assets upon contract execution (in case of making payments in the form of transfer of underlying assets) with regard to investors’ positions.

3. When carrying out a derivatives transaction, an investor shall put down a margin with a clearing member as follows:

a/ Before carrying out the transaction, the investor shall fully put down an initial margin for the whole positions expected to be opened for the clearing member, except reciprocal transactions;

b/ The investor shall maintain the margin for its/his/her position and add the margin when the value of collaterals falls below the required margin level or the margin deposit balance is not large enough to ensure a monetary margin rate as required by the clearing member. Depending on market conditions, the clearing member may request the investor to add the margin right at the trading session;

c/ The investor may withdraw part of collaterals if their value exceeds the required margin level set by the clearing member;

d/ For an initial margin or addition of the existing margin, the clearing member may request the investor to put down or add the margin wholly in cash or permit the investor to use part of collaterals being securities according to the monetary margin rate set by the clearing member which, however, must not be lower than the monetary margin rate set in regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 11. Clearing and payment principles set out by the Vietnam Securities Depository and Clearing Corporation

1. Derivatives clearing shall be carried out by the Vietnam Securities Depository and Clearing Corporation for each account of investors and clearing members on the principle that reciprocal positions of the same derivative have the same date of maturity on the same account that are reciprocally cleared by the Vietnam Securities Depository and Clearing Corporation to determine the number of net derivatives positions on such account.

2. The Vietnam Securities Depository and Clearing Corporation may refuse replacements for illegal transactions and notify the Hanoi Stock Exchange of transactions whose replacements are refused, including the following transactions:

a/ Transactions conducted by clearing members after the Vietnam Securities Depository and Clearing Corporation sends a notice to the Hanoi Stock Exchange for suspending transactions for such clearing members; and transactions of non-clearing members that sign clearing or payment entrustment contracts with such clearing members;

b/ Receipt transactions conducted on the dates different from the working days shown in the system of the Vietnam Securities Depository and Clearing Corporation;

c/ Transactions conducted for derivatives codes not yet accepted for clearing in the system of the Vietnam Securities Depository and Clearing Corporation;

d/ Transactions conducted by non-clearing members while the clearing or payment is not accepted by general clearing members in the system of the Vietnam Securities Depository and Clearing Corporation;

dd/ Other transactions as reported by the Vietnam Securities Depository and Clearing Corporation and approved by the State Securities Commission of Vietnam.

3. With regard to daily payment of position profits and losses, the Vietnam Securities Depository and Clearing Corporation shall, based on day-end profits and losses on accounts of investors, make monetary clearing for each clearing member in order to determine the value payable and receivable by such clearing member. Such payment shall be made by transfer via the payment deposit account of the Vietnam Securities Depository and Clearing Corporation opened at the payment bank.

4. With regard to payment upon contract execution, the Vietnam Securities Depository and Clearing Corporation shall make payments on the final payment date on the following principles:

a/ In case of making cash payments: The Vietnam Securities Depository and Clearing Corporation shall calculate the payment obligation separately for each investor and clearing member. The payer’s clearing member shall fully transfer money to the payment deposit account opened at the payment bank. The payee’s clearing member shall make payments to the investor right after receiving payments from the Vietnam Securities Depository and Clearing Corporation;

b/ In case of making payments in the form of transfer of underlying assets: The seller’s clearing member shall transfer underlying assets or transferable assets in sufficient quantity and of proper category under the derivatives contract to the margin securities account at the request of the Vietnam Securities Depository and Clearing Corporation. In case the held securities are not enough for transfer, the clearing member may use securities borrowed from the securities borrowing and lending system of the Vietnam Securities Depository and Clearing Corporation to make payments under regulations of the Vietnam Securities Depository and Clearing Corporation.

The buyer’s clearing member may only receive the transferred assets after making full payments at the request of the Vietnam Securities Depository and Clearing Corporation, then distribute such assets to the buyer’s investor right after receiving them;

c/ In case a clearing member has not enough money for making payments or not enough government bonds for transfer within a law-specified time limit, the Vietnam Securities Depository and Clearing Corporation may make cash payments for government bond futures contracts. In this case, the above clearing member shall pay a compensation amount not smaller than 5% of the contract payment value to related clearing members via the Vietnam Securities Depository and Clearing Corporation. The Vietnam Securities Depository and Clearing Corporation shall provide the determination of compensation value and payment method.

5. The Vietnam Securities Depository and Clearing Corporation shall promulgate regulations guiding the order and procedures for clearing, payment and transfer of underlying assets upon contract execution, payment methods, and payment time.

Article 12. Margin accounts of clearing members

1. The Vietnam Securities Depository and Clearing Corporation shall open margin deposit accounts and payment deposit accounts under its name at payment banks (below referred to as members’ deposit accounts) and margin securities accounts at the Corporation (below referred to as members’ margin securities accounts) for management of collaterals and performance of payment obligations for positions under names of clearing members.

2. Members’ deposit accounts at payment banks opened for each clearing member include:

a/ Margin deposit account for dealing, used to manage margins for dealing and market making transactions of such clearing member;

b/ Margin deposit accounts of clients, used to manage margins of all clients of such clearing member;

c/ Payment deposit account, used to make daily payment of position profits and losses, payment upon execution of contracts under the name of such clearing member, and other payment activities of such clearing member.

3. Members’ deposit accounts and members’ margin securities accounts may only be used for:

a/ Receipt and refund of collaterals to clearing members. Collaterals on such accounts include also assets of clients that are used by clearing members as putting down margins for positions of such clients;

b/ Receipt of profits or payment of losses on a daily basis for positions under names of clearing members; making and receipt of payments upon contract execution; receipt of interests on margin deposits at banks;

c/ Receipt and transfer of underlying securities upon contract execution (in case of making payments by transfer of underlying assets) for positions under names of clearing members.

4. Members’ deposit accounts and members’ margin securities accounts shall be established in a way ensuring that assets of clearing members are managed separately from assets of the Vietnam Securities Depository and Clearing Corporation, and ensuring that assets of each clearing member and assets of all clearing members are managed separately from assets of clients of such clearing members.

5. At any time, the Vietnam Securities Depository and Clearing Corporation may request clearing members to provide detailed information about trading accounts, margin accounts, and value and list of collaterals of each investor.

6. Money and securities earned from the exercise of rights to margin securities on members’ margin accounts shall be distributed under regulations of the Vietnam Securities Depository and Clearing Corporation. The Vietnam Securities Depository and Clearing Corporation may not use margin money of clearing members to make time deposits. Interests on margin deposits shall be refunded to clearing members at demand deposit interest rates announced by payment banks.

7. The Vietnam Securities Depository and Clearing Corporation shall establish a system for management of information about positions, payment obligations, margin balance, and value and list of collaterals in securities by margin account of investors and clearing members.

Article 13. Margins put down by clearing members

1. The Vietnam Securities Depository and Clearing Corporation shall determine required margin levels that clearing members have to put down for outstanding positions under their names after the trading hours.

2. Required margin levels shall be determined based on risk margins, spread margins for futures contracts, margins for transfer of government bond futures contracts, minimum margins, and other factors deemed by the Vietnam Securities Depository and Clearing Corporation as necessary.

3. Clearing members shall add collaterals in case the value of collaterals is lower than the required margin level set out by the Vietnam Securities Depository and Clearing Corporation. Clearing members may partially withdraw collaterals if their value is higher than the required margin level set out by the Vietnam Securities Depository and Clearing Corporation.

4. Clearing members may put down margins in cash or in securities but shall ensure that such margins are at least equal to 80% of the required margin level, except cases in which position-holding investors that sell government bond futures contracts for executing the contracts in the form of transfer of underlying assets put down margins in transferable government bonds.

5. On a trading day, the Vietnam Securities Depository and Clearing Corporation shall supervise the value of collaterals of clearing members. In case a clearing member fails to maintain the value of collaterals as required, the Vietnam Securities Depository and Clearing Corporation may give a warning to such clearing member and apply one of the following measures:

a/ Requesting the Hanoi Stock Exchange to suspend transactions for related trading accounts, except reciprocal transactions for reduction of positions;

b/ Requesting clearing members (for dealing accounts), or via clearing members requesting investors (for accounts of investors) to add collaterals and conduct reciprocal transactions for reduction of positions.

6. The opening of margin accounts, determination of margin types, adjustment of margin levels, methods of determining margin levels and parameters used in such methods, types of assets acceptable as collaterals, mode, time and procedures for putting down or withdrawing margins, exercise of rights related to margin securities, and other relevant contents must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 14. Collaterals

1. Investors and clearing members may use money and securities to put down margins for derivatives transactions.

2. Clearing members may allow investors to use securities as collaterals if such securities meet the following criteria:

a/ Being on the list of securities acceptable as collaterals announced by the Vietnam Securities Depository and Clearing Corporation under Clause 3 of this Article;

b/ Being other than security assets used in transactions under the civil law’s provisions on trading in security assets, including also stocks purchased in buying-on-margin transactions; being other than assets currently blocked by organizations or state management agencies under relevant laws or assets currently used for lending in accordance with law;

c/ Meeting other criteria set by clearing members.

3. The Vietnam Securities Depository and Clearing Corporation may accept securities as collaterals for derivatives positions if such securities fully meet the following criteria:

a/ Being on the list of assets acceptable as collaterals of the Vietnam Securities Depository and Clearing Corporation;

b/ Not being subject to warning, control, or suspension from trading on the Hanoi Stock Exchange or Ho Chi Minh Stock Exchange; or being other than securities of issuing institutions that currently undergo procedures for liquidation, dissolution, bankruptcy, consolidation or merger;

c/ Not being put in pledge, blocked or temporarily seized at the Vietnam Securities Depository and Clearing Corporation;

d/ Being freely transferable and having been deposited on trading securities accounts at the Vietnam Securities Depository and Clearing Corporation; or being assets under the ownership of investors or clearing members that put down margins;

dd/ Other criteria under regulations of the Vietnam Securities Depository and Clearing Corporation.

4. The Vietnam Securities Depository and Clearing Corporation and clearing members shall announce on their websites the list of securities acceptable as collaterals and rates of discount of securities. In case of change of securities acceptable as collaterals, investors or clearing members shall replace such securities with cash or other securities acceptable as collaterals at the request of the Vietnam Securities Depository and Clearing Corporation and clearing members.

5. Management of collaterals:

a/ The Vietnam Securities Depository and Clearing Corporation and clearing members shall manage collaterals of clearing members and investors under Articles 33 and 34 of Decree No. 158/2020/ND-CP;

b/ Clearing members may only use collaterals on margin accounts of investors to put down margins, secure payment obligations, and make payments for positions on corresponding trading accounts of such investors, except the cases specified at Points d and dd of this Clause;

c/ Collaterals of investors shall be managed separately and are neither nor regarded as assets of clearing members, even when they have been deposited on members’ margin accounts. In case a clearing member falls bankrupt, collaterals of investors shall be refunded to such investors after their payment obligations are fulfilled;

d/ In case an investor becomes insolvent, the clearing member may use, sell or transfer collaterals without having to obtain the approval of the investor. Within 1 day after disposing of collaterals, the clearing member shall send to the investor a notice of the disposal of collaterals by the methods stated in the contract on opening of the derivatives trading account. Such notice must clearly state reasons for the disposal, assets disposed of, method and time of disposal, and value of disposed assets;

dd/ The Vietnam Securities Depository and Clearing Corporation may use collaterals it has received from investors and clearing members to support the making of payments for positions of investors and clearing members under Points c and dd, Clause 5, Article 28 of Decree No. 158/2020/ND-CP;

e/ During the margin-making period, investors and clearing members may still enjoy rights and interests derived from margin securities in accordance with the law on enterprises and law on securities. The guarantee of interests of investors with respect to margin securities must comply with regulations of the Vietnam Securities Depository and Clearing Corporation;

g/ During the period of margin making on margin accounts, investors and clearing members may not transfer, donate, put in mortgage or pledge, make escrow account or security collateral, or register security assets or use collaterals for other purposes.

Article 15. Handling of cases of insolvency

1. A clearing member or an investor being a client of a clearing member will become insolvent when falling into one of the following cases:

a/ Failing to promptly perform or incompletely performing obligations to pay for position losses or compensations under Point c, Clause 4, Article 11 of this Circular, or the obligation to make payments upon contract execution under regulations of the Vietnam Securities Depository and Clearing Corporation;

b/ Falling bankrupt or being declared bankrupt in accordance with the law on corporate bankruptcy;

c/ Other cases as specified in regulations of the Vietnam Securities Depository and Clearing Corporation.

2. In case a clearing member or an investor being a client of a clearing member becomes insolvent under Point a, Clause 1 of this Article, the Vietnam Securities Depository and Clearing Corporation may use the sources below to make offsets in the following order:

a/ Using margins of insolvent clearing members or of clients of insolvent clearing members;

b/ Using monetary contributions to the Clearing Fund made by insolvent clearing members, in case the margins are not enough for offsetting the payment obligation;

c/ Using monetary contributions to the Clearing Fund made by other clearing members at ratios set by the Vietnam Securities Depository and Clearing Corporation. In this case, the Vietnam Securities Depository and Clearing Corporation shall notify related clearing members of detailed information about the use of the Clearing Fund right on the day it uses the money. Insolvent clearing members shall refund all assets of the Clearing Fund that have been used and pay interests to other members at rates set by the Vietnam Securities Depository and Clearing Corporation in accordance with current regulations;

d/ Using its operational risk provision fund under regulations;

dd/ Using its lawful funding sources after obtaining approval of the Ministry of Finance.

3. Apart from using the sources specified in Clause 2 of this Article, the Vietnam Securities Depository and Clearing Corporation may take the following measures:

a/ To request insolvent clearing members to state reasons and provide all information relating to solvency, and provide client lists, customer identification information, and information on margin accounts of clients;

b/ To coordinate with the Hanoi Stock Exchange in restricting or banning the opening of new positions under names of insolvent clearing members, except reciprocal transactions;

c/ To request insolvent clearing members to pay for their positions under Point b, Clause 5, Article 28 of Decree No. 158/2020/ND-CP;

d/ To open trading accounts at the Hanoi Stock Exchange for conducting reciprocal transactions to reduce positions of insolvent clearing members under Point b, Clause 5, Article 28 of Decree No. 158/2020/ND-CP.

4. In case an investor becomes insolvent, a clearing member shall immediately notify the Vietnam Securities Depository and Clearing Corporation of the position and list of collaterals of such investor and may take the following measures:

a/ To request the investor or the clearing member to carry out compulsory closure and liquidation of open positions of the investor;

b/ To suspend the receipt of trading orders from related investors for opening new positions and, at the same time, cancel unexecuted trading orders of such investor;

c/ To use, sell or transfer collaterals of investors for use as security assets or buy security assets for loans for performing payment obligations for open positions of investors. In case such collaterals are not enough, to use its/his/her assets for execution of derivatives contracts of the investor;

d/ The investor shall refund to the clearing member the whole assets already used by the latter for performing the former’s payment obligations and bear all relevant expenses.

5. In case a clearing member becomes insolvent and the Vietnam Securities Depository and Clearing Corporation has taken the payment support measures specified in Clauses 2 and 3 of this Article, such clearing member shall refund all assets it/he/she has used to the Vietnam Securities Depository and Clearing Corporation from the Clearing Fund, Operational Risk Provision Fund or lawful funding sources of the Vietnam Securities Depository and Clearing Corporation to secure the payment and bear all relevant expenses.

The Vietnam Securities Depository and Clearing Corporation may sell collaterals and contributions to the Clearing Fund that are securities of insolvent clearing members at prices set by the Vietnam Securities Depository and Clearing Corporation in order to refund the sources used and offset financial losses (if any) arising in the course of insolvency solution.

6. Clearing members and investors being clients of insolvent clearing members shall refund the support amounts they have used under Clause 2 of this Article in the following order:

a/ Lawful funding sources of the Vietnam Securities Depository and Clearing Corporation;

b/ The Operational Risk Provision Fund of the Vietnam Securities Depository and Clearing Corporation;

c/ Contributions of other clearing members to the Clearing Fund;

d/ Contributions of the insolvent clearing members to the Clearing Fund at the Vietnam Securities Depository and Clearing Corporation;

dd/ Margin amounts of clearing members that have been used to secure payment for insolvent investors.

Article 16. The Clearing Fund

1. Forms of making contributions to the Clearing Fund:

a/ Clearing members are obliged to make contributions to the Clearing Fund at an initial minimum level after the Vietnam Securities Depository and Clearing Corporation approves in principle the registration for becoming clearing members and periodically make additional contributions (if any) to the Clearing Fund under Clause 2 of this Article.

Clearing members may make contributions to the Clearing Fund in cash or in securities under regulations of the Vietnam Securities Depository and Clearing Corporation;

b/ Clearing members may extraordinarily make additional contributions to the Clearing Fund under regulations of the Vietnam Securities Depository and Clearing Corporation in the following cases:

- They are placed in the state of warning on financial safety in accordance with the law on securities or on capital adequacy in accordance with the banking law;

- Their assets used for making contributions to the Clearing Fund are blocked or confiscated by competent state agencies or under court rulings;

- Other cases as reported by the Vietnam Securities Depository and Clearing Corporation and approved by the State Securities Commission of Vietnam.

2. Levels of contributions to the Clearing Fund:

a/ Initial minimum level: VND 10 billion, for direct clearing members, or VND 15 billion, for general clearing members;

b/ On a monthly basis, the Vietnam Securities Depository and Clearing Corporation shall reevaluate the size of the Clearing Fund and determine the obligation of each clearing member to make contributions to the Clearing Fund based on the scale of transactions, market price fluctuations, financial obligations, risk levels, and other criteria. Each clearing member’s contribution to be made as a result of reevaluation must not be lower than the initial minimum level specified at Point a of this Clause.

In case the balance of contributions to the Clearing Fund is larger than the level of contribution a clearing member is obliged to make, such clearing member may withdraw the difference. In case the balance of contributions to the Clearing Fund is smaller than the level of contribution a clearing member is obliged to make, such clearing member shall make additional contributions for the difference.

3. Management of the Clearing Fund:

a/ Assets contributed by a clearing member to the Clearing Fund shall come under ownership of such clearing member and be managed by the Vietnam Securities Depository and Clearing Corporation separately from the latter’s assets. The Vietnam Securities Depository and Clearing Corporation has the total right to use, even sell, assets contributed to the Clearing Fund for performing obligations of positions under names of clearing members;

b/ For monetary contributions of clearing members, the Vietnam Securities Depository and Clearing Corporation shall open deposit accounts at the payment bank for managing such contributions.

For contributions in securities of clearing members, the Vietnam Securities Depository and Clearing Corporation shall open depository accounts under its name for managing such contributions. Stock dividends, bond yields and other benefits from contributions in securities shall be refunded to clearing members after relevant expenses and taxes have been deducted;

c/ Interests on contributions to the Clearing Fund shall be distributed for clearing members based on their contributed amounts and duration of making contributions after relevant expenses have been deducted.

4. Use of the Clearing Fund:

a/ Assets contributed by clearing members to the Clearing Fund shall be used by the Vietnam Securities Depository and Clearing Corporation to secure payment obligations of insolvent clearing members. The use of the Clearing Fund must comply with Points b and c, Clause 2, and Clause 5, Article 15 of this Circular.

Insolvent clearing members shall bear interests for the use of the Clearing Fund under regulations of the Vietnam Securities Depository and Clearing Corporation;

b/ Clearing members may only be refunded the assets contributed to the Clearing Fund when their membership is invalidated or when they are no longer clearing members. The refund of collaterals to the Clearing Fund shall be carried out after the Vietnam Securities Depository and Clearing Corporation has deducted payable amounts, including also amounts of compensation for financial damage (if any) to the Corporation, and to-be-paid amounts for execution of positions under names of such clearing members under regulations.

In case a clearing member is undergoing procedures for cancellation of their membership, its/his/her assets contributed to the Clearing Fund shall be managed separately from the Clearing Fund and serve as a basis for a competent agency to issue a withdrawal decision (if any) after deduction of the amount payable by such clearing member to the Vietnam Securities Depository and Clearing Corporation.

5. The ratio of monetary contributions to the Clearing Fund and types of securities contributed to the Clearing Fund; method of evaluation of the size of the Clearing Fund; process of contributing assets and withdrawing assets contributed to the Clearing Fund; methods of receiving and distributing deposit interests and earnings from the use of the Clearing Fund, and other relevant issues must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Chapter IV

MEMBERS OF THE VIETNAM EXCHANGE AND VIETNAM SECURITIES DEPOSITORY AND CLEARING CORPORATION

Section 1

MEMBERS OF THE VIETNAM EXCHANGE

Article 17. Operations of trading members and special trading members

1. Non-clearing members shall enter into clearing and payment entrustment contracts with general clearing members. These contracts must comply with current regulations and have at least the contents specified in Form No. 01 provided in the Appendix to this Circular. The finalization, account transfer of margins and change of positions in case of changing general clearing members must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

2. Trading members shall enter into contracts on opening of derivatives trading accounts with clients. Contracts on opening of derivatives trading accounts must comply with current regulations and have at least the contents specified in Form No. 02 provided in the Appendix to this Circular.

3. Non-clearing members shall regularly collate, review, update, fully and promptly provide information on transactions and other relevant information to general clearing members. Information on investors and their trading accounts (if any) shall be fully and promptly provided to the State Securities Commission of Vietnam, Vietnam Securities Depository and Clearing Corporation, Hanoi Stock Exchange, and Vietnam Exchange when so requested in writing.

4. A trading member shall immediately stop receiving trading orders from a client, except reciprocal transactions, and close the client’s account immediately after completing the liquidation of the client’s position if finding that the client opens a trading account in one of the following cases:

a/ The client violates Clause 2, Article 6 of this Circular;

b/ The client is a minor;

c/ The client has his/her civil act capacity limited; has lost his/her civil act capacity; has difficulty in cognizing and controlling his/her acts; is serving his/her prison sentence or is banned by the court from practicing certain professions or performing certain jobs.

5. Trading members may only receive reciprocal transactions from clearing members and clients of insolvent clearing members and shall carry out other activities at the request of the Hanoi Stock Exchange, Vietnam Securities Depository and Clearing Corporation, and State Securities Commission of Vietnam.

Article 18. Operations of market makers

1. Market makers shall fulfill market-making obligations under market making contracts and regulations of the Vietnam Exchange.

2. Market makers may simultaneously carry out market making transactions and dealing transactions in adherence to the principles set out in regulations of the Vietnam Exchange.

Article 19. Cessation of trading operations of trading members

1. The Vietnam Exchange may cease part or the whole of derivatives trading activities of a trading member in the following cases:

a/ The trading member’s derivatives brokerage or dealing activities are ceased by the State Securities Commission of Vietnam;

b/ The trading member’s derivatives clearing and payment activities are ceased by the Vietnam Securities Depository and Clearing Corporation (in case the trading member is concurrently a clearing member);

c/ The general clearing member that is providing clearing and payment services to the trading member has its derivatives clearing and payment activities ceased or its membership canceled by the Vietnam Securities Depository and Clearing Corporation (in case the trading member is a non-clearing member);

d/ The trading member seriously and systematically breaches the obligations specified in regulations of the Vietnam Exchange;

dd/ Other cases as specified in regulations of the Vietnam Exchange;

e/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

2. The cessation period for the cases specified in Clause 1 of this Article is provided as follows:

a/ For the case specified at Point a, Clause 1 of this Article, the cessation period is the period for which the State Securities Commission of Vietnam ceases derivatives business activities;

b/ For the case specified at Point b, Clause 1 of this Article, the cessation period will last until the Vietnam Securities Depository and Clearing Corporation resumes their derivatives clearing and payment activities of trading members;

c/ For the case specified at Point c, Clause 1 of this Article, the cessation period will last for up to 90 days or until trading members are provided with clearing and payment services by other substitute clearing members (whichever comes first);

d/ For the case specified at Point d, Clause 1 of this Article, the maximum cessation period is 90 days;

dd/ For the cases specified at Points dd and e, Clause 1 of this Article, the cessation period must comply with regulations of the Vietnam Exchange.

3. The order and procedures for cessation of trading activities of trading members must comply with regulations of the Vietnam Exchange.

Article 20. Cancellation of membership of trading members

1. The Vietnam Exchange may cancel membership of a trading member in the following cases:

a/ The trading member volutarity requests cancellation of its membership and such request is approved by the Vietnam Exchange;

b/ The trading member is subject to compulsory cancellation of membership.

2. A trading member is subject to compulsory cancellation of membership specified at Point b, Clause 1 of this Article in the following cases:

a/ Upon the expiration of the maxium cessation period specified in Clause 2, Article 19 of this Circular, it still fails to remedy its violations that lead to the operation cessation;

b/ It fails to satisfy conditions for acting as a trading member specified in Clause 1, Article 22 of Decree No. 158/2020/ND-CP;

c/ It has its license for establishment and securities business operation revoked;

d/ It is merged or dissolved or falls bankrupt;

dd/ Other cases as specified in regulations of the Vietnam Exchange;

e/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

3. Dossiers, order and procedures for cancellation of membership of trading members must comply with regulations of the Vietnam Exchange.

Article 21. Cessation of trading operations of special trading members

1. The Vietnam Exchange may cease trading operations of a special trading member in the following cases:

a/ Its provision of derivatives clearing and payment services is ceased by the State Securities Commission of Vietnam (in case the special trading member is concurrently a clearing member);

b/ Its derivatives clearing and payment activities are ceased by the Vietnam Securities Depository and Clearing Corporation (in case the special trading member is concurrently a clearing member);

c/ The general clearing member that is providing clearing and payment services to the special trading member has its derivatives clearing and payment activities ceased or its membership canceled by the Vietnam Securities Depository and Clearing Corporation (in case the special trading member is a non-clearing member);

d/ The special trading member seriously and systematically violates the obligations specified in regulations of the Vietnam Exchange;

dd/ Other cases as specified in regulations of the Vietnam Exchange;

e/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

2. The cessation period for the cases specified in Clause 1 of this Article is provided as follows:

a/ For the case specified at Point a, Clause 1 of this Article, the cessation period is the period for which the State Securities Commission of Vietnam ceases the provision of derivatives clearing and payment services;

b/ For the case specified at Point b, Clause 1 of this Article, the cessation period is the period for which the Vietnam Securities Depository and Clearing Corporation ceases derivatives clearing and payment activities; 

c/ For the case specified at Point c, Clause 1 of this Article, the cessation period will last up to 90 days or until special trading members are provided with clearing and payment services by other substitute clearing members (whichever comes first);

d/ For the case specified at Point d, Clause 1 of this Article, the maximum cessation period is 90 days;

dd/ For the cases specified at Points dd and e, Clause 1 of this Article, the cessation period must comply with regulations of the Vietnam Exchange.

3. The order and procedures for cessation of trading operations of special trading members must comply with regulations of the Vietnam Exchange.

Article 22. Cancellation of membership of special trading members

1. The Vietnam Exchange may cancel membership of a special trading member in the following cases:

a/ The special trading member volutarily requests cancellation of its membership and such request is approved by the Vietnam Exchange;

b/ The special trading member is subject to compulsory cancellation of membership.

2. A special trading member is subject to compulsory cancellation of membership under Point b, Clause 1 of this Article in the following cases:

a/ Upon the expiration of the maximum cessation period specified in Clause 2, Article 21 of this Circular, it still fails to remedy its violations that lead to the operation cessation;

b/ It fails to satisfy conditions for acting as a special trading member specified in Clause 1, Article 23 of Decree No. 158/2020/ND-CP;

c/ It is merged or dissolved or falls bankrupt;

d/ Other cases as specified in regulations of the Vietnam Exchange;

dd/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

3. Dossiers, order and procedures for cancellation of membership of special trading members must comply with regulations of the Vietnam Exchange.

Article 23. Cessation of market making activities of market makers

1. The Vietnam Exchange may cease market making activities of a market maker in the following cases:

a/ The market maker fails to fulfill one of the obligations specified in regulations of the Vietnam Exchange;

b/ The market maker has its trading operations on the derivatives market ceased by the Vietnam Exchange or has its clearing and payment activities on the derivatives market ceased by the Vietnam Securities Depository and Clearing Corporation;

c/ Other cases as specified in regulations of the Vietnam Exchange;

d/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

2. For the cases specified at Points a and b, Clause 1 of this Article, the maximum cessation period is 90 days. For the cases specified at Points c and d, Clause 1 of this Article, the cessation period must comply with regulations of the Vietnam Exchange.

3. The order and procedures for cessation of market making activities of market makers must comply with regulations of the Vietnam Exchange.

Article 24. Cancellation of membership of market makers

1. The Vietnam Exchange may cancel membership of a market maker in the following cases:

a/ The market maker volutarily requests cancellation of its membership and such request is approved by the Vietnam Exchange under the market making contract with the Hanoi Stock Exchange;

b/ The market maker is subject to compulsory cancellation of membership.

2. A market maker is subject to compulsory cancellation of membership under Point b, Clause 1 of this Article in the following cases:

a/ Upon the expiration of the cessation period specified in Clause 2, Article 23 of this Circular, it still fails to remedy its violations that lead to the operation cessation;

b/ It fails to satisfy conditions for acting as a market maker specified in Clause 1, Article 24 of Decree No. 158/2020/ND-CP;

c/ It has its membership as a trading member or special trading member cancelled by the Vietnam Exchange or has its membership as a clearing member cancelled by the Vietnam Securities Depository and Clearing Corporation;

d/ Other cases as specified in regulations of the Vietnam Exchange;

dd/ Other cases as reported by the Vietnam Exchange and approved by the State Securities Commission of Vietnam.

3. Dossiers, order and procedures for cancellation of membership of market makers must comply with regulations of the Vietnam Exchange.

Article 25. Other forms of handling violations applicable to members of the Vietnam Exchange

1. In addition to the forms of handling violations specified in Clauses 1 and 2, Article 19; Clause 2, Article 20; Clauses 1 and 2, Article 21; Clause 2, Article 22; Clauses 1 and 2, Article 23; and Clause 2, Article 24, of this Circular, the Vietnam Exchange may apply the following forms of handling violations:

a/ Reminder;

b/ Reprimand;

c/ Suspension of connection to the trading system or suspension of sending and receipt of trading orders.

2. Violations, and the order and procedures for handling of violations committed by members specified in Clause 1 of this Article must comply with regulations of the Vietnam Exchange.

Section 2

MEMBERS OF THE VIETNAM SECURITIES DEPOSITORY AND CLEARING CORPORATION

Article 26. Operations of clearing members

1. Clearing members shall enter into clearing and payment contracts with the Vietnam Securities Depository and Clearing Corporation. General clearing members shall enter into clearing and payment entrustment contracts with non-clearing members (if any). These contracts must state that clearing members act as authorized representatives of brokerage clients and clearing and payment clients at positions under such clients’ names and fulfill such clients’ obligations toward the Vietnam Securities Depository and Clearing Corporation.

2. Clearing members shall separately manage margin accounts and collaterals of clients; establish logbook systems and record adequate information about positions, daily position profits and losses, initial margin value, required margin value, and value and list of collaterals on each account of investors.

3. Clearing member may determine the initial margin value, required margin value and monetary margin ratio for each investor which must not be lower than corresponding values specified in regulations of the Vietnam Securities Depository and Clearing Corporation. Information about assets acceptable as collaterals, methods of and time limits for putting down margins must be provided on websites of clearing members.

Article 27. Cessation of derivatives clearing and payment activities of clearing members

1. The Vietnam Securities Depository and Clearing Corporation shall issue a decision on cessation of derivatives clearing and payment activities of a clearing member in the following cases:

a/ The clearing member is insolvent with its payment deficit exceeding the total collateral balance usable at the time it is insolvent and the balance of its assets contributed to the Clearing Fund;

b/ The clearing member fails to fully make a required contribution to the Clearing Fund within 10 days after the expiration of the contribution time limit notified by the Vietnam Securities Depository and Clearing Corporation;

c/ The clearing member fails to fully refund the payment support from the Clearing Fund, Operational Risk Provision Fund and funding sources of the Vietnam Securities Depository and Clearing Corporation within 5 working days from the date such supports are used;

d/ The clearing member fails to fully pay a compensation amount specified at Point c, Clause 4, Article 11 of this Circular within 2 working days after the expiration of the payment time limit notified by the Vietnam Securities Depository and Clearing Corporation;

dd/ The clearing member fails to reduce the number of positions which exceeds the position limit within 5 working days after receiving a notice of violation from the Vietnam Securities Depository and Clearing Corporation;

e/ The clearing member fails to make collaterals within 3 working days after receiving a notice from the Vietnam Securities Depository and Clearing Corporation;

g/ The clearing member receives the Vietnam Securities Depository and Clearing Corporation’s reprimand decisions at least twice a month or in 2 consecutive months;

h/ The clearing member has its derivatives clearing and payment service provision activities ceased by the State Securities Commission of Vietnam;

i/ Other cases as specified in regulations of the Vietnam Securities Depository and Clearing Corporation;

k/ Other cases as reported by the Vietnam Securities Depository and Clearing Corporation and approved by the State Securities Commission of Vietnam.

2. The cessation period for the cases specified in Clause 1 of this Article is provided as follows:

a/ For the cases specified at Points a, b, c, d, dd, e and g, Clause 1 of this Article, the maximum cessation period is 90 days;

b/ For the case specified at Point h, Clause 1 of this Article, the cessation period is the period for which the State Securities Commission of Vietnam ceases provision of derivatives clearing and payment services;

c/ For the cases specified at Points i and k, Clause 1 of this Article, the cessation period must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

3. The order and procedures for cessation of derivatives clearing and payment activities of clearing members must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 28. Cancellation of membership of clearing members

1. The Vietnam Securities Depository and Clearing Corporation shall cancel the membership of a clearing member in the following cases:

a/ The clearing member voluntarily requests cancellation of its membership and such request is approved by the Vietnam Securities Depository and Clearing Corporation;

b/ The clearing member is subject to compulsory cancellation of its membership.

2. A clearing member will be subject to compulsory cancellation of its membership under Point b, Clause 1 of this Article in the following cases:

a/ Upon the expiration of the period of suspension from derivatives clearing and payment activities as specified in Clause 2, Article 27 of this Circular, the clearing member still fails to remediate its violations at the request of the Vietnam Securities Depository and Clearing Corporation and the State Securities Commission of Vietnam;

b/ The clearing member voluntarily terminates its derivatives clearing and payment service provision activities or is compelled by the State Securities Commission of Vietnam to terminate such activities under Article 12 or 13 of Decree No. 158/2020/ND-CP;

c/ The clearing member is regulated by the Vietnam Exchange’s decision on cancellation of membership of a trading member or special trading member;

d/ Other cases as stated in regulations of the Vietnam Securities Depository and Clearing Corporation;

dd/ Other cases as reported by the Vietnam Securities Depository and Clearing Corporation and approved by the State Securities Commission of Vietnam.

3. The membership of a clearing member shall be cancelled only after the clearing member completes the transfer of positions or margin making in order to finalize clients’ accounts, liquidate positions and fulfill payment obligations on dealing accounts (if any), and fulfills all obligations toward the Vietnam Securities Depository and Clearing Corporation.

4. Dossiers, order and procedures for cancellation of membership of clearing members must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 29. Other forms of handling of violations applicable to clearing members

1. Apart from the forms of handling of violations specified in Clauses 1 and 2, Article 27 and Clause 2, Article 28 of this Circular, the Vietnam Securities Depository and Clearing Corporation may apply the following forms of handling of violations:

a/ Warning;

b/ Reprimand.

2. The determination of violations committed by clearing members, and the order and procedures for handling of violations mentioned in Clause 1 of this Article must comply with regulations of the Vietnam Securities Depository and Clearing Corporation.

Chapter V

REPORTING REGIME

Article 30. Periodical reports

1. On a monthly, quarterly and annual basis, derivatives business institutions shall send written or electronic reports on derivatives business activities to the State Securities Commission of Vietnam, made according to Form No. 03 provided in the Appendix to this Circular.

2. On a monthly, quarterly and annual basis, commercial banks and foreign bank branches being special trading members shall send written or electronic reports on derivatives trading activities to the State Securities Commission of Vietnam, made according to Form No. 04 provided in the Appendix to this Circular.

3. On a monthly, quarterly and annual basis, payment banks shall send written or electronic reports on their derivatives payment activities to the State Securities Commission of Vietnam, made according to Form No. 05 provided in the Appendix to this Circular.

4. On an annual basis, payment banks shall send written or electronic reports on their satisfaction of the law-specified conditions for acting as payment banks to the State Securities Commission of Vietnam, made according to Form No. 06 provided in the Appendix to this Circular.

5. On a biannual basis, clearing members being commercial banks or foreign bank branches shall send written or electronic reports on their satisfaction of the law-specified conditions for providing derivatives clearing or payment services to the State Securities Commission of Vietnam, made according to Form No. 07 provided in the Appendix to this Circular.

6. Time limits for sending reports:

a/ Monthly reports shall be sent to the State Securities Commission of Vietnam within the first 10 days of the month following the reporting month;

b/ Quarterly reports shall be sent to the State Securities Commission of Vietnam within the first 20 days of the quarter following the reporting quarter;

c/ Biannual reports shall be sent to the State Securities Commission of Vietnam within 45 days from the end of the first 6 months of the reporting year;

d/ Annual reports shall be sent to the State Securities Commission of Vietnam within the first 90 days of the year following the reporting year.

7. Data cutoff time for periodical reports:

a/ The annual reporting period is 12 months, counting from the beginning of January 1 to the end of December 31 of a calendar year;

b/ The biannual reporting period is 6 months, counting from the beginning of January 1 to the end of June 30 of a calendar year;

c/ The quarterly reporting period is 3 months, counting from the beginning of the 1^st of the first month of a quarter to the end of the last day of the last month of such quarter;

d/ The monthly reporting period is 1 month, counting from the beginning of the 1^st to the end of the last day of a month.

Article 31. Extraordinary reports

1. Derivatives business institutions, derivatives clearing and payment service providers, trading members, special trading members, market makers, and clearing members shall send written or electronic reports to the State Securities Commission of Vietnam within 24 hours after:

a/ A clearing member is changed;

b/ An incident related to the trading system (receiving or placing orders) occurs;

c/ A clearing member being a commercial bank or foreign bank branch no longer satisfies one of the law-specified conditions for providing derivatives clearing and payment services;

d/ A clearing member’s charter capital or equity is reduced by more than 10% against that stated in the audited annual financial statement or reviewed biannual financial statement or latest quarterly financial statement; or its debt-to-equity ratio exceeds 5.

2. Payment banks shall send written or electronic reports to the State Securities Commission of Vietnam and the Vietnam Securities Depository and Clearing Corporation immediately when derivatives payment activities are interrupted.

3. Payment banks shall send written or electronic reports to the State Securities Commission of Vietnam within 24 hours from the time they no longer satisfy one of the law-specified conditions for acting as payment banks.

4. The Vietnam Exchange and Hanoi Stock Exchange shall report in writing to the State Securities Commission of Vietnam within 24 hours after:

a/ An incident in the derivatives trading system or abnormal signs occur(s) in derivatives transactions;

b/ Derivatives trading activities or market making activities are suspended or the membership of trading members, special trading members or market makers is cancelled;

c/ Confidential information is provided to competent state agencies.

5. The Vietnam Securities Depository and Clearing Corporation shall report to the State Securities Commission of Vietnam within 24 hours after:

a/ A clearing member becomes insolvent for derivatives transactions;

b/ Derivatives clearing and payment activities are suspended or the membership of clearing members is cancelled;

c/ Confidential information is provided to competent state agencies.

Article 32. On-demand reports

1. Apart from the periodical and extraordinary reports as specified in Articles 30 and 31 of this Circular, when necessary, in order to protect common interests and interests of investors, the State Securities Commission of Vietnam may request the Vietnam Exchange, Hanoi Stock Exchange, Vietnam Securities Depository and Clearing Corporation, derivatives business institutions, derivatives clearing and payment service providers, and payment banks to report on derivatives trading, business, and clearing and payment activities.

2. The Vietnam Exchange, Hanoi Stock Exchange, Vietnam Securities Depository and Clearing Corporation, derivatives business institutions, and derivatives clearing and payment service providers shall report in writing or electronically to the State Securities Commission of Vietnam within the time limit set by the latter after receiving the request specified in Clause 1 of this Article.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 33. Effect

1. This Circular takes effect on August 27, 2021.

2. The Minister of Finance’s Circular No. 11/2016/TT-BTC of January 19, 2016, guiding a number of articles of the Government’s Decree No. 42/2015/ND-CP of May 5, 2015, on derivatives and the derivatives market (below referred to as Circular No. 11/2016/TT-BTC), and the Minister of Finance’s Circular No. 23/2017/TT-BTC of March 16, 2017, amending and supplementing a number of articles of Circular No. 11/2016/TT-BTC (below referred to as Circular No. 23/2017/TT-BTC), cease to be effective on the date this Circular takes effect, except Clause 1, Article 34 of this Circular.

Article 34. Transitional provisions

1. Before the official organization of margin making activities of clearing members under Article 13 of this Circular, the Vietnam Securities Depository and Clearing Corporation, Hanoi Stock Exchange, trading members, special trading members, market makers, and clearing members may continue applying the provisions on margin making of Circular No. 11/2016/TT-BTC and Circular No. 23/2017/TT-BTC. The making of margins, refusal of positions, and post-transaction correction of errors mentioned in this Circular shall be implemented from the date of official organization of margin making activities according to the new information technology system for the securities market.

2. The Vietnam Securities Depository shall implement this Circular’s provisions on professional operations applicable to the Vietnam Securities Depository and Clearing Corporation until the Vietnam Securities Depository and Clearing Corporation officially operates under Law No. 54/2019/QH14 on Securities.

3. The Hanoi Stock Exchange shall implement this Circular’s provisions on professional operations applicable to the Vietnam Exchange until the Vietnam Exchange officially operates under Law No. 54/2019/QH14 on Securities, and Clause 1, Article 8 of the Prime Minister’s Decision No. 37/2020/QD-TTg of December 23, 2020, on the establishment, organization and operation of the Vietnam Exchange.

Article 35. Organization of implementation

1. In pursuance to this Circular, the Vietnam Securities Depository and Clearing Corporation and Vietnam Exchange shall issue regulations on professional operations after obtaining approval of the State Securities Commission of Vietnam.

2. Any problems arising in the course of implementation of this Circular should be promptly reported to the Ministry of Finance for study, guidance and revision.-

For the Minister of Finance
Deputy Minister
HUYNH QUANG HAI

* The Appendix to this Circular is not translated.