Decree No. 158/2020/ND-CP on derivatives and the derivatives market

DECREE

On derivatives and the derivatives market^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government; and the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and Law on Organization of Local Administration;

Pursuant to the November 26, 2019 Law on Securities;

Pursuant to the June 17, 2020 Law on Enterprises;

At the proposal of the Minister of Finance,

The Government promulgates the Decree on derivatives and the derivatives market.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides derivatives and the derivatives market in Vietnam.

Article 2. Subjects of application

1. Vietnamese and foreign institutions and individuals investing in derivatives and operating on the derivatives market in Vietnam.

2. State management agencies in charge of securities and the securities market.

3. Other agencies, institutions and individuals involved in investment and trading in derivatives and the derivatives market in Vietnam.

Article 3. Interpretation of terms

In this Decree, the terms below are construed as follows:

1. Derivatives business means performance of one, several or all of the following activities: derivatives brokerage, derivatives dealing, and derivatives investment consultancy.

2. Position of a derivative (below referred to as position) means the trading status and volume of an immature derivative held by an investor at a time. When an investor buys or sells a derivative, it/he/she is said to be opening a long position or opening a short position of such derivative.

3. Open position of a derivative means that an investor is holding an immature derivative.

4. Net position of a derivative at a time means the difference between the open long position and open short position of such derivative at the same time.

5. Position limit means the maximum net position of a derivative or of a derivative and other derivatives based on the same underlying asset which an investor is entitled to hold at a time.

6. Trading order limit of a derivative means the maximum quantity of such derivative which may be placed on a trading order.

7. Derivatives trading member (below referred to as trading member) means a securities company admitted by the Stock Exchange as its  derivatives trading member.

8. Special trading member on the derivatives market (below referred to as special trading member) means a commercial bank or foreign bank branch admitted by the Stock Exchange as its special trading member that may trade in derivatives on government bonds.

9. Market maker means a trading member or special trading member that may carry out market making activities for one or several derivative(s).

10. Derivatives clearing member (below referred to as clearing member) means a securities company, commercial bank or foreign bank branch admitted by the Vietnam Securities Depository and Clearing Corporation as a clearing member to make clearing of or payment for derivatives transactions.

11. General clearing member means a clearing member that may make clearing of or payment for its own or its clients’ derivatives transactions and provide derivatives clearing or payment services to non-clearing members and their clients.

12. Direct clearing member means a clearing member that may only make clearing of or payment for its own derivatives transactions or its own and its clients’ derivatives transactions.

13. Non-clearing trading member (below referred to as non-clearing member) means a trading member or special trading member other than a clearing member.

14. Market making activities means performance of purchase and sale transactions to create liquidity for one or several derivative(s) traded on the Stock Exchange.

15. Clearing or payment entrustment contract means a contract under which a non-clearing member entrusts a general clearing member to make clearing of or payment for its own and its clients’ derivatives transactions.

16. Clearing collateral (below referred to as collateral) means money, securities and other assets as specified by the Vietnam Securities Depository and Clearing Corporation which may be used to secure the obligation to pay for derivatives transactions of investors and clearing members.

17. Clearing margin account (below referred to as margin account) means an account opened for an investor or a clearing member to manage its/his/her positions and collaterals and pay for its/his/her derivatives transactions.

18. Derivatives clearing and payment means activities including making of margins, comparison and certification of transaction results, handling of errors, trading replacement, clearing, determination of payment obligations, transfer of money or transfer of money and underlying assets on the date of payment.

19. Central counterparty mechanism means derivatives transaction clearing and payment activities carried out by the Vietnam Securities Depository and Clearing Corporation that, through replacement activities, becomes a partner of a derivatives transaction while a clearing member acts as the other partner of the transaction.

20. Replacement means replacement of a party to a derivatives contract or transaction with another party, whereby the replacing party inherits all interests and obligations related to the derivatives contract or transaction of the replaced party.

Chapter II 

DERIVATIVES BUSINESS INSTITUTIONS AND DERIVATIVES CLEARING AND PAYMENT SERVICE PROVIDERS

Section 1

DERIVATIVES BUSINESS INSTITUTIONS

Article 4. Conditions for grant of a derivatives business eligibility certificate

1. A securities company or securities investment fund management company (below referred to as fund management company) may only be engaged in derivatives business after being granted a derivatives business eligibility certificate by the State Securities Commission of Vietnam:

a/ A securities company may carry out one, several or all of derivatives business operations, including: derivatives brokerage, derivatives dealing, and derivatives investment consultancy;

b/ A fund management company may carry out only the derivatives investment consultancy operation.

2. Conditions for a securities company to be granted a derivatives business eligibility certificate:

a/ Having been licensed to carry out all securities business operations;

b/ Satisfying the following conditions on charter capital or equity:

- For derivatives brokerage: having the charter capital or equity of at least VND 800 billion;

- For derivatives dealing: having the charter capital or equity of at least VND 600 billion;

- For derivatives investment consultancy: having the charter capital or equity of at least VND 250 billion;

- In case of having made business registration for all operations of derivatives brokerage, derivatives dealing and derivatives investment consultancy, a securities company must have the charter capital or equity of at least VND 800 billion;

c/ Satisfying requirements on internal control and risk management for securities business operations in accordance with the regulations on operation of securities companies;

d/ Satisfying the condition on personnel: The Director (General Director) and Deputy Director (Deputy General Director) in charge of professional operations and at least 5 staff members for each derivatives business operation intended to be registered must possess a securities practice certificate in accordance with law and a certificate of professional training in derivatives and the derivatives market;

dd/ Continusly maintaining a liquidity ratio of at least 220% for the last 12 consecutive months; and having set aside all provisions as required by law;

e/ Having suffered no losses for the last 2 years;

g/ Obtaining the unqualified opinion of the audit firm for the audited financial statement of the latest fiscal year and the reviewed latest biannual financial statement (for case of application for a derivatives business eligibility certificate after June 30);

h/ Not undergoing reorganization, dissolution or bankruptcy; not being subject to operation cessation or operation suspension under a decision of a competent agency.

3. Conditions for a fund management company to be granted a derivatives business eligibility certificate:

a/ Having the charter capital or equity of at least VND 25 billion;

b/ Satisfying the condition on personnel: The Director (General Director) and Deputy Director (Deputy General Director) in charge of professional operations and at least 5 staff members for the derivatives investment consultancy operation must possess a securities practice certificate and a certificate of professional training in derivatives and the derivatives market;

c/ Satisfying the conditions specified at Points dd, e, g and h, Clause 2 of this Article.

Article 5. Dossiers, order and procedures for grant and modification of derivatives business eligibility certificates

1. A dossier of application for a derivatives business eligibility certificate must comprise:

a/ An application for a new or modified derivatives business eligibility certificate, made according to Form No. 01 provided in the Appendix to this Decree;

b/ A resolution of the Shareholders’ General Meeting or Members’ Council or a decision of the owner on derivatives business;

c/ Audited financial statements of the latest 2 fiscal years and the reviewed latest biannual financial statement (for case of application for a derivatives business eligibility certificate after June 30); and a report on financial safety ratios for the latest 12 months;

d/ A list of the Director (General Director), Deputy Directors (Deputy General Directors) in charge of professional operations, and staff members for different derivatives business operations, made according to Form No. 02 provided in the Appendix to this Decree, enclosed with their personal files. A personal file must at least comprise a people’s identity card or citizen identity card or passport, a securities business practice certificate, a certificate of professional training in derivatives and the derivatives market, and a labor contract;

dd/ Processes of internal control and risk management for derivatives business operations.

2. Documents included in a dossier specified in Clause 1 of this Article are not required in case they have been sent to the State Securities Committee of Vietnam under regulations on reporting and information disclosure.

3. A dossier of application for a derivatives business eligibility certificate shall be made in 1 original set. In case a document included in the dossier is a copy, such copy must be made from the master register or certified. Such a dossier shall be hand-delivered, sent by post or submitted via the online public service to the State Securities Commission of Vietnam under guidance of the Minister of Finance.

4. Within 5 working days after receiving a dossier, the State Securities Commission of Vietnam shall send a written request to the securities company or fund management company for modification or supplementation of the dossier (if necessary).

5. Within 15 days after receiving a complete and valid dossier, the State Securities Commission of Vietnam shall grant a derivatives business eligibility certificate. In case of refusal to grant such a certificate, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

6. Within 12 months after being granted a derivatives business eligibility certificate, a securities company licensed to carry out the derivatives brokerage operation shall make trading member registration; otherwise, the State Securities Commission of Vietnam shall issue a decision to revoke the derivatives business eligibility certificate.

7. Modification of a derivatives business eligibility certificate due to addition of derivatives business operations shall be carried out under provisions of Articles 4 and Clauses 1 thru 5, Article 5 of this Decree regarding grant of derivatives business eligibility certificates.

Article 6. Cessation and resumption of derivatives business operations

1. The State Securities Commission of Vietnam shall issue a decision on cessation for up to 12 months of one or several derivatives business operation(s) of a derivatives business institution in the following cases:

a/ The securities company has failed to satisfy one or several of the conditions specified at Points b, c, d and dd, Clause 2, Article 4 of this Decree for 6 consecutive months; or the fund management company has failed to satisfy one or several of the conditions specified at Point dd, Clause 2, and Points a and b, Clause 3, Article 4 of this Decree for 6 consecutive months;

b/ The derivatives business institution is subject to operation cessation or suspension in accordance with law.

2. After receiving a decision of the State Securities Commission of Vietnam on cessation of derivatives business operations:

a/ Within 24 hours, the derivatives business institution shall disclose information on the cessation of derivatives business operations;

b/ Within 5 working days, the derivatives business institution shall disclose information on plans, time limit and schedule for settlement of valid contracts and send notices of contract settlement plans to its clients. The time limit for contract settlement must be between 45 days and 60 days from the date of information disclosure for settlement of positions and account transfer of collaterals.

3. During the operation cessation period, a derivatives business institution shall:

a/ Report or disclose on a monthly basis or at the request of the State Securities Commission of Vietnam information on its status and related operations; refrain from entering into new derivatives business contracts, and suspend all derivatives business operations, except the cases specified at Points b, c and d of this Clause;

b/ Regarding valid derivatives business contracts, the securities company shall:

- Receive and execute only trading orders of its clients for reciprocal transactions; receive collaterals of its clients only in case of collateral addition;

- Close balances of and liquidate clients’ accounts; liquidate positions and refund collaterals to its clients; reach agreement on and hand over rights, responsibilities and obligations, and transfer accounts, collaterals  and open positions of its clients to the replacing securities company upon request of its clients;

- Execute transactions at the request of the Vietnam Securities Depository and Clearing Corporation and the Stock Exchange in order to reduce positions of its clients;

c/ Liquidate and close positions on dealing accounts and market maker accounts (if any), prioritizing execution of transactions of its clients before its own position-closing transactions;

d/ Pay fully taxes, service prices, debts and other financial obligations related to derivatives business operations (if any).

4. The State Securities Commission of Vietnam shall issue a decision on resumption of derivatives business operations of a derivatives business institution only after such institution has fully remedied its violations that lead to its operation cessation.

Article 7. Voluntary termination of derivatives business operations

1. A derivatives business institution that wishes to voluntarily terminate its derivatives business operations shall submit a dossier to the State Securities Commission of Vietnam, which must comprise:

a/ A written request for termination of derivatives business operations, made according to Form No. 03 provided in the Appendix to this Decree;

b/ A resolution of the Shareholders’ General Meeting or Members’ Council or a decision of the owner on termination of derivatives business operations and approval of a plan on settlement of related issues;

c/ Plans on settlement of valid derivatives business contracts, including a plan on settlement of accounts and collaterals of clients.

2. A dossier of request for voluntary termination of derivatives business operations shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered, sent by post or submitted via the online public service system to the State Securities Commission of Vietnam under guidance of the Minister of Finance.

3. Within 5 working days after receiving a dossier, the State Securities Commission of Vietnam shall send a written request for dossier modification or supplementation (if necessary) to the securities business institution.

4. Within 7 working days after receiving a complete and valid dossier, the State Securities Commission of Vietnam shall issue a written permission for performance of procedures for voluntary termination of derivatives business operations. In case of refusal to issue such a permission, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

5. After receiving a written permission of the State Securities Commission of Vietnam for performance of procedures for termination of derivatives business operations:

a/ Within 24 hours, the derivatives business institution shall disclose information on performance of procedures for termination of derivatives business operations;

b/ Within 5 working days, the securities company shall disclose information on plans, time limit and schedule for settlement of valid contracts and send notices of contract settlement plans to its clients. The time limit for contract settlement must be between 45 days and 60 days from the date of information disclosure for settlement of positions and account transfer of collaterals.    

6. During the period of performance of procedures for operation termination, a derivatives business institution shall:

a/ Report or disclose on a monthly basis or at the request of the State Securities Commission of Vietnam information on its status and related operations; refrain from entering into new derivatives business contracts; and terminate all derivatives business operations, except the cases specified at Points b, c and d of this Clause;

b/ Regarding valid derivatives business contracts, the securities company shall:

- Receive and execute only trading orders of its clients for reciprocal transactions; receive collaterals of its clients only in case of collateral addition;

- Close balances of and liquidate clients’ accounts; liquidate positions and refund collaterals to its clients; reach agreement on and hand over rights, responsibilities and obligations, and transfer accounts, collaterals and open positions of its clients to the replacing derivatives business institution;

- Execute transactions at the request of the Vietnam Securities Depository and Clearing Corporation and the Stock Exchange in order to reduce positions of its clients;

c/ Liquidate and close positions on dealing accounts and market maker accounts (if any), prioritizing execution of transactions of its clients before its own position-closing transactions;

d/ Pay fully taxes, service prices, debts and other financial obligations related to derivatives business operations (if any).

7. Within 5 working days after completing the procedures specified in Clauses 5 and 6 of this Article, a derivatives business institution shall submit a dossier of reporting on settlement results to the State Securities Commission of Vietnam, which must comprise:

a/ A list of clients with adequate know-your-customer information, derivatives trading account and margin account numbers, and a list of collaterals and positions on each account; reasons for failure to liquidate and settle existing accounts that remain unsettled;

b/ A minutes of liquidation and certification made by the replacing clearing member that the handover of margin accounts and collaterals of clients to the replacing member (if any) is completed;

c/ A decision on revocation of trading member status or clearing member status;

d/ A written certification that taxes, service prices, debts and other financial obligations related to derivatives business operations have been fully paid.

8. Within 5 working days after receiving a dossier of reporting on settlement results specified in Clause 7 of this Article, the State Securities Commission of Vietnam shall modify the derivatives business eligibility certificate, for case of termination of one or several derivatives business operation(s), or issue a decision on revocation of the derivatives business eligibility certificate, for case of termination of all derivatives business operations. In case of refusal to do so, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

Article 8. Compulsory termination of derivatives business operations

1. A derivatives business institution is compelled to terminate its derivatives business operations in the following cases:

a/ Upon the expiration of the derivatives business operation cessation period, it still fails to remedy its violations that lead to the operation cessation;

b/ It is dissolved, falls bankrupt, suspends its operations or has its establishment and operation license revoked; is divided, split up, consolidated or merged but the institution formed from the division, splitting, consolidation or merger fails to satisfy one of the business conditions specified in Clauses 2 and 3, Article 4 of this Decree.

2. Within 30 days after a derivatives business institution falls into one of the cases specified in Clause 1 of this Article, the State Securities Commission of Vietnam shall send a written request to such institution for performance of procedures for termination of its derivatives business operations.

3. Upon receiving a written request of the State Securities Commission of Vietnam for compulsory termination of derivatives business operations, a derivatives business institution shall disclose information and send notices to its clients under Clause 5, Article 7 of this Decree.

4. A derivatives business institution shall comply with Clauses 6 and 7, Article 7 of this Decree for carrying out procedures for termination of its derivatives business operations and send to the State Securities Commission of Vietnam a dossier of reporting on settlement results.

5. Within 5 working days after receiving a dossier of reporting on results of performance of procedures for termination of derivatives business operations, the State Securities Commission of Vietnam shall modify the derivatives business eligibility certificate, for case of termination of one or several derivatives business operation(s), or issue a decision on revocation of the derivatives business eligibility certificate, for case of termination of all derivatives business operations.  

Section 2

DERIVATIVES CLEARING AND PAYMENT SERVICE PROVIDERS

Article 9. Conditions for grant of a derivatives clearing and payment service provision eligibility certificate

1. A securities company, commercial bank or foreign bank branch may only provide derivatives clearing and payment services after being granted a derivatives clearing and payment service provision eligibility certificate by the State Securities Commission of Vietnam:

a/ A securities company may make clearing or payment for its own and its clients’ derivatives transactions, and provide derivatives clearing and payment services to non-clearing members and their clients;

b/ A commercial bank or foreign bank branch may only make clearing or payment for its own derivatives transactions.

2. Conditions for a securities company to be granted a derivatives clearing and payment service provision eligibility certificate:

a/ Having been granted a securities depository operation registration certificate;

b/ Having been licensed for derivatives brokerage operation;

c/ Satisfying the following conditions on charter capital or equity:

- For direct clearing members: having the charter capital or equity of at least VND 900 billion;

- For general clearing members: having the charter capital or equity of at least VND 1.2 trillion;

d/ Having a liquidity ratio of at least 260% for the last 12 consecutive months, and a debt-to-equity ratio not exceeding 5 as stated in the latest annual financial statement; and having set aside all provisions as required by law;

dd/ Having suffered no losses for the last 2 years;

e/ Obtaining the unqualified opinion of the audit firm for the audited financial statement of the latest fiscal year and the reviewed latest biannual financial statement (for case of application for a derivatives clearing and payment service provision eligibility certificate after June 30);

g/ Satisfying requirements on internal control and risk management in accordance with regulations on operation of securities companies;

h/ Not undergoing reorganization, dissolution or bankruptcy; not being subject to operation cessation or operation suspension under a decision of a competent agency.

3. Conditions for a commercial bank or foreign bank branch to be granted a derivatives clearing and payment service provision eligibility certificate:

a/ Satisfying the conditions for securities clearing and payment service provision prescribed by the law on credit institutions;

b/ Having the charter capital or equity of at least VND 5 trillion, for commercial banks, or the allocated capital of at least VND 1 trillion, for foreign bank branches;

c/ Having satisfied the condition on capital adequacy ratio as prescribed by the law on credit institutions for the last 12 months;

d/ Satisfying the conditions specified at Points a and b, Clause 2 of this Article.

Article 10. Dossiers, order and procedures for grant of derivatives clearing and payment service provision eligibility certificates

1. A dossier of application for a derivatives clearing and payment service provision eligibility certificate must comprise:

a/ An application for a derivatives clearing and payment service provision eligibility certificate, made according to Form No. 04 provided in the Appendix to this Decree;

b/ A resolution of the Shareholders’ General Meeting or Members’ Council or a decision of the owner on provision of derivatives clearing and payment services;

c/ Audited financial statements of the latest 2 fiscal years and the reviewed latest biannual financial statement (for case of application for a derivatives clearing and payment service provision eligibility certificate after June 30); and a report on financial safety ratio for the latest 12 months (for securities companies) or a document proving satisfaction of the requirement on capital adequacy ratio (for commercial banks and foreign bank branches);

d/ Processes of internal control and risk management for the provision of derivatives clearing and payment services;

dd/ A written permission of the State Bank of Vietnam for the commercial bank or foreign bank branch to provide derivatives clearing and payment services in accordance with the law on credit institutions.

2. Documents included in a dossier specified in Clause 1 of this Article are not required in case they have been sent to the State Securities Commission of Vietnam under regulations on reporting and information disclosure.

3. A dossier of application for a derivatives clearing and payment service provision eligibility certificate shall be made in an original set. In case a document included in the dossier is a copy, such copy must be made from the master register or certified. Such a dossier shall be hand-delivered, sent by post or submitted via the online public service system to the State Securities Commission of Vietnam under guidance of the Minister of Finance.

4. Within 5 working days after receiving a dossier, the State Securities Commission of Vietnam shall send a written request to the securities company, commercial bank or foreign bank branch for modification or supplementation of the dossier (if necessary).

5. Within 15 days after receiving a complete and valid dossier, the State Securities Commission of Vietnam shall grant a derivatives clearing and payment service provision eligibility certificate. In case of refusal to grant such a certificate, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

6. Within 12 months after being granted a derivatives clearing and payment service provision eligibility certificate, a derivatives clearing and payment service provider shall make trading member registration; otherwise, the State Securities Commission of Vietnam shall issue a decision to revoke its derivatives clearing and payment service provision eligibility certificate.

Article 11. Cessation or resumption of provision of derivatives clearing and payment services

1. The State Securities Commission of Vietnam shall issue a decision on cessation for up to 12 months of derivatives clearing and payment service provision of a derivatives clearing and payment service provider in the following cases:

a/ The securities company has failed to satisfy the conditions specified at Points c and d, Clause 2, Article 9 of this Decree for 6 consecutive months; or the commercial bank or foreign bank branch has failed to satisfy the conditions specified at Points b and c, Clause 3, Article 9 of this Decree for 6 consecutive months;

b/ The derivatives clearing and payment service provider is subject to operation cessation or suspension in accordance with law.

2. A derivatives clearing and payment service provider suspended from providing derivatives clearing and payment services shall take the measures specified in Clauses 2 and 3, Article 6 of this Decree.

3. The State Securities Commission of Vietnam shall issue a decision on resumption of derivatives clearing and payment service provision of a derivatives clearing and payment service provider only after such service provider has fully remedied its violations that lead to the operation cessation.

Article 12. Voluntary termination of derivatives clearing and payment service provision

1. A derivatives clearing and payment service provider that wishes to voluntarily terminate its derivatives clearing and payment service provision shall submit a dossier to the State Securities Commission of Vietnam, which must comprise:

a/ A written request for termination of derivatives clearing and payment service provision, made according to Form No. 05 provided in the Appendix to this Decree;

b/ A resolution of the Shareholders’ General Meeting or Members’ Council or a decision of the owner on termination of derivatives clearing and payment service provision and approval of a plan on settlement of related issues;

c/ Plans on settlement of valid derivatives clearing and payment service provision contracts, including a plan on settlement of margin accounts and collaterals of clients.

2. A dossier of request for voluntary termination of derivatives clearing and payment service provision shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered, sent by post or submitted via the online public service system to the State Securities Commission of Vietnam under guidance of the Minister of Finance.

3. Within 5 working days after receiving a dossier, the State Securities Commission of Vietnam shall send a written request for dossier modification or supplementation (if necessary) to the derivatives clearing and payment service provider.

4. Within 7 working days after receiving a complete and valid dossier, the State Securities Commission of Vietnam shall issue a written permission for performance of procedures for termination of derivatives clearing and payment service provision. In case of refusal to issue such a permission, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

5. After receiving a written permission of the State Securities Commission of Vietnam for performance of procedures for termination of derivatives clearing and payment service provision, a derivatives clearing and payment service provider shall take the measures specified in Clauses 5 and 6, Article 7 of this Decree.

6. Within 5 working days after completing the procedures specified in Clause 5 of this Article, a derivatives clearing and payment service provider shall submit to the State Securities Commission of Vietnam a dossier of reporting on settlement results, which must comprise:

a/ A list of clients with adequate know-your-customer information, derivatives trading accounts, margin accounts, and a list of collaterals and positions on each account; reasons for failure to liquidate and settle existing accounts that remain unsettled;

b/ A minutes of liquidation and certification made by the replacing clearing member that the handover of margin accounts and collaterals of clients to the replacing member (if any) is completed;

c/ A decision on revocation of clearing member status;

d/ A written certification that taxes, service prices, debts and other financial obligations related to derivatives clearing and payment service provision have been fully paid.

7. Within 5 working days after receiving a dossier of reporting on results of settlement of the termination of derivatives clearing and payment service provision, the State Securities Commission of Vietnam shall issue a decision on revocation of the derivatives clearing and payment service provision eligibility certificate. In case of refusal to issue such a decision, the State Securities Commission of Vietnam shall reply in writing, clearly stating the reason.

Article 13. Compulsory termination of derivatives clearing and payment service provision

1. A derivatives clearing and payment service provider is compelled to terminate its derivatives clearing and payment service provision in the following cases:

a/ Upon the expiration of the derivatives clearing and payment service provision cessation period, it still fails to remedy its violations that lead to the operation cessation;

b/ It is dissolved, falls bankrupt, suspends its operation or has its establishment and operation license revoked; no longer conducts derivatives brokerage; or is divided, split up, consolidated or merged but the institution formed from the division, splitting, consolidation or merger fails to satisfy one of the business conditions specified in Clauses 2 and 3, Article 9 of this Decree.

2. Within 30 days after a derivatives clearing and payment service provider is compelled to terminate its derivatives clearing and payment service provision, the State Securities Commission of Vietnam shall send a written request to such service provider for performance of procedures for termination of its derivatives clearing and payment service provision.

3. Upon receiving a written request of the State Securities Commission of Vietnam for compulsory termination of derivatives clearing and payment service provision, a derivatives clearing and payment service provider shall implement and apply relevant provisions of Clauses 5 and 6, Article 7 of this Decree.

4. Within 5 working days after completing the procedures specified in Clause 3 of this Article, a derivatives clearing and payment service provider shall submit to the State Securities Commission of Vietnam a dossier of reporting on settlement results under Clause 6, Article 12 of this Decree.

5. Within 5 working days after receiving a dossier of reporting on results of performance of procedures for termination of derivatives clearing and payment service provision, the State Securities Commission of Vietnam shall issue a decision on revocation of the derivatives clearing and payment service provision eligibility certificate.  

Chapter III

THE DERIVATIVES TRADING MARKET

Section 1

DERIVATIVES

Article 14. Derivatives to be traded on the derivatives market

1. Derivatives to be traded on the derivatives market include:

a/ Futures and listed options based on underlying assets being securities, securities indexes or other assets as prescribed by the Government which may be used as a basis for valuation of derivatives;

b/ Forwards and options of agreement-based transactions based on underlying assets being securities or securities indexes on the Stock Exchange.

2. A derivative to be traded on the Stock Exchange must have the following principal contents:

a/ Information on underlying assets, including their names and codes and other information;

b/ Information on the derivative, including title and size of the contract, trading method, position limit, trading duration, maturity time, last payment date, last trading date, listing date, payment mode, tick size, quotation unit, fluctuation limit, method of determining end-of-the-day price, final payment price, reference price, and margin level;

c/ For derivatives being options, there must be also information on option type (put or call), option style (exercise on the maturity date or exercise before or on the maturity date), and exercise price.

Article 15. Listing of derivatives       

1. The Stock Exchange shall coordinate with the Vietnam Securities Depository and Clearing Corporation in determining contents of derivatives as specified in Clause 2, Article 14 of this Decree; list derivatives and organize derivatives trading after obtaining approval from the State Securities Commission of Vietnam in accordance with law.

2. The Stock Exchange shall delist a derivative in the following cases:

a/ The derivative becomes mature;

b/ The derivative’s underlying asset is delisted or no longer used as underlying asset;

c/ Other cases in which the State Securities Commission of Vietnam deems it necessary to delist the derivative to protect interests of investors.

3. The delisting of a derivative under Point b, Clause 2 of this Article is subject to approval by the State Securities Commission of Vietnam.

Article 16. Derivatives investment

1. Institutions and individuals may freely invest in derivatives available on the derivatives market, except cases in which they are prohibited by competent agencies to carry out securities and securities market activities for a definite time or an indefinite time for their violations in securities and securities market activities and the following cases of conditional investment:

a/ A securities company may invest in derivatives only after being granted a derivatives business eligibility certificate by the State Securities Commission of Vietnam to carry out the derivatives dealing operation;

b/ A fund management company may only invest in derivatives for the purpose of preventing risks for securities portfolios which it is holding with regard to entrusted capital from investment portfolio management activities; and may only invest in derivatives for the purpose of preventing risks in accordance with regulations on securities investment funds with regard to capital sources of securities investment funds or securities investment companies. A fund management company may not invest in derivatives with its own capital, loans and other lawfully raised capital sources;

c/ A credit institution or foreign bank branch may invest in derivatives only after obtaining written approval from the State Bank;

d/ An insurance enterprise or a foreign insurance enterprise branch may only invest in derivatives in accordance with the law on insurance business;

dd/ A state economic group, state corporation or state enterprise may invest in derivatives only after obtaining permission from a competent state agency in accordance with the law on management and use of state capital invested in production or business at enterprises.

2. In the course of derivatives investment or derivatives business, institutions and individuals shall bear responsibility for risks and comply with law and may not commit prohibited acts prescribed by the law on securities and the securities market.

Section 2

ORGANIZATION OF THE DERIVATIVES TRADING MARKET

Article 17. Organization of derivatives trading

1. The Stock Exchange may organize the derivatives trading market referred to in Clause 1, Article 14 of this Decree. 

2. The Stock Exchange shall organize and administer operation of the derivatives trading market in accordance with the Law on Securities, this Decree, relevant legal documents, and its charter.

3. The Stock Exchange may suspend trading in one, several or all of derivatives on the market after obtaining approval from the State Securities Commission of Vietnam in the following cases:

a/ It is impossible to valuate underlying assets due to cessation of trading on the underlying market or suspension of underlying asset trading for 3 working days;

b/ A force majeure event or technical incident occurs in the securities trading system or securities clearing or payment system;

c/ The State Securities Commission of Vietnam so requests to protect lawful rights and interests of investors and ensure stability and safety of the securities market.

Article 18. Rights of the Stock Exchange regarding derivatives trading activities

1. To design products, list derivatives and organize trading in listed derivatives and issue professional regulations after obtaining approval from the State Securities Commission of Vietnam.

2. To accept or reject registration, suspend or cancel the membership of trading members, special trading members and market makers.

3. In case a trading member has its membership suspended or cancelled and therefore cannot perform the agreement and find a replacing trading member, the Stock Exchange may designate a replacing trading member to take over the rights and obligations of such member.

4. To request the Vietnam Securities Depository and Clearing Corporation to timely and fully provide necessary information serving the supervision and organization of the derivatives trading market in accordance with law.

5. Other rights provided in Clauses 1 and 4, Article 46 of the Law on Securities and other relevant laws.

Article 19. Obligations of the Stock Exchange regarding derivatives trading activities

1. To ensure information technology and technical infrastructure systems for operation of the derivatives trading market; to organize operation of the derivatives trading market, supervise and disclose information on derivatives trading in accordance with law.

2. To inspect and supervise the maintenance of conditions for member registration and compliance with its regulations and relevant regulations by trading members, special trading members and market makers; to promptly, fully and accurately report on operation of the market and members to the State Securities Commission of Vietnam under regulations, or when so requested or detecting a violation.

3. To coordinate with the Vietnam Securities Depository and Clearing Corporation in ensuring safe and efficient trading activities on the derivatives trading market and clearing and payment of derivatives transactions in accordance with this Decree and other relevant legal documents.

4. To perform other obligations provided in Clauses 2 and 4, Article 46 of the Law on Securities and other relevant laws.

Article 20. Derivatives trading

1. Trading in listed derivatives specified at Point a, Clause 1, Article 14 of this Decree shall be carried out via trading members and the Stock Exchange. The Stock Exchange shall organize trading in listed derivatives by methods of order matching and agreement.

2. Agreement-based derivatives transactions specified at Point b, Clause 1, Article 14 of this Decree may be carried out under agreements between the parties to transactions and in compliance with relevant regulations. After entering into and performing contracts, investors shall notify such in writing to the Vietnam Securities Depository and Clearing Corporation.

3. The Minister of Finance shall provide guidance on derivatives trading.

Article 21. Market stabilization measures

1. The Stock Exchange may apply one or several of the following measures to stabilize the market and protect investors under its regulations:

a/ Changing the number of trading sessions and trading time;

b/ Applying or adjusting order limits;

c/ Applying fluctuation limits or market circuit breakers;

d/ Limiting the opening of new positions;

dd/ Ceasing or cancelling trading orders.

2. The Stock Exchange may suspend or cease part or the whole of or resume derivatives trading activities after obtaining approval from the State Securities Commission of Vietnam.

Section 3

TRADING MEMBERS, SPECIAL TRADING MEMBERS, MARKET MAKERS

Article 22. Registration of trading members

1. A securities company that wishes to register itself as a trading member on the Stock Exchange must satisfy the following conditions:

a/ Being licensed to carry out the derivatives brokerage operation;

b/ Meeting requirements of the Stock Exchange on information technology infrastructure and professional process for derivatives trading;

c/ Having clearing and payment entrustment contracts with general clearing members, in case of registration as a non-clearing member.

2. A trading member registration dossier of a securities company must comprise:

a/ An application for registration as a trading member on the derivatives market, made according to Form No. 06 provided in the Appendix to this Decree;

b/ A derivatives business eligibility certificate granted by the State Securities Commission of Vietnam;

c/ A written explanation about information technology infrastructure facilities and professional process under guidance of the Stock Exchange;

d/ Clearing and payment entrustment contracts with general clearing members, in case of registration as a non-clearing member.

3. A trading member registration dossier shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered or sent by post to the Stock Exchange.

4. Within 7 working days after receiving a trading member registration dossier:

a/ In case the dossier is complete and valid, the Stock Exchange shall request in writing the registering institution to complete its physical foundations, install systems and connect software for trading data transmission and receipt, conduct trial transactions, and perform other jobs for trading organization;

b/ In case the dossier is incomplete and invalid, the Stock Exchange shall request in writing the registering institution to modify or supplement the dossier.

5. Within 5 working days after the securities company completes preparations for trading organization, the Stock Exchange shall issue a decision to approve trading member status of, and disclose information on, the new member in its information disclosure media.

6. The Stock Exchange shall disapprove trading member status in the following cases:

a/ The registering institution fails to satisfy conditions for becoming a trading member;

b/ The member registration dossier contains a forged document or untruthful information;

c/ The securities company fails to complete procedures for being granted a decision approving its trading member status within 90 days after the Stock Exchange sends a written request to the former under Clause 4 of this Article.

The Stock Exchange shall send a written reply to the registering securities company, clearly stating the reason for disapproval, and disclose information in its information disclosure media.

7. A trading member shall commence its trading activities on the derivatives trading system at the Stock Exchange within 60 days after its membership is approved.

8. Cessation of trading activities of trading members, termination or cancellation of trading member status, handling of violations committed by trading members, and other activities related to trading members must comply with regulations on the Minister of Finance and the Stock Exchange.

9. A securities company may only register itself as a trading member once again after 2 years from the date of voluntary cancellation of its membership or after 3 years from the date of compulsory cancellation of its membership.

Article 23. Registration of special trading members

1. A commercial bank or foreign bank branch may register itself as a special trading member on the Stock Exchange when satisfying the following conditions:

a/ Being a special trading member on the governmental bond market of the Stock Exchange;

b/ Having obtained a written permission of the State Bank for investment in derivatives;

c/ Having clearing and payment entrustment contracts with general clearing members, in case of registration as a non-clearing member;

d/ Satisfying requirements of the Stock Exchange on information technology infrastructure and professional process for derivatives trading;

dd/ Not undergoing consolidation, merger or dissolution; not being subject to control or special control, operation cessation or operation suspension under a decision of a competent agency.

2. A special trading member registration dossier must comprise:

a/ An application for registration as a special trading member on the derivatives market, made according to Form No. 06 provided in the Appendix to this Decree;

b/ A written permission of the State Bank for investment in derivatives;

c/ A written explanation about information technology infrastructure facilities and professional process under guidance of the Stock Exchange;

d/ Clearing and payment entrustment contracts with general clearing members in case of registration as a non-clearing member.

3. A special trading member registration dossier shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered or sent by post to the Stock Exchange.

4. Within 7 working days after receiving a special trading member registration dossier:

a/ In case the dossier is complete and valid, the Stock Exchange shall request in writing the registering institution to complete its physical foundations, install systems and connect software for trading data transmission and receipt, conduct trial transactions, and perform other jobs for trading organization;

b/ In case the dossier is incomplete and invalid, the Stock Exchange shall request in writing the registering institution to modify or supplement the dossier.

5. Within 5 working days after the commercial bank or foreign bank branch completes preparations for trading, the Stock Exchange shall issue a decision to approve special trading member status of, and disclose information on, the new member in its information disclosure media.

6. The Stock Exchange shall disapprove special trading member status in the following cases:

a/ The registering institution fails to satisfy conditions for becoming a special trading member;

b/ The member registration dossier contains a forged document or untruthful information;

c/ The commercial bank or foreign bank branch fails to complete procedures for being granted a decision approving its special trading member status within 90 days after the Stock Exchange sends a written request to the former under Clause 4 of this Article.

The Stock Exchange shall send a written reply to the commercial bank or foreign bank branch registering itself as a member, clearly stating the reason for disapproval, and disclose information in its information disclosure media.

7. Cessation of trading activities of special trading members, termination or cancellation of special trading member status, handling of violations committed by special trading members, and other activities related to special trading members must comply with regulations on the Minister of Finance and the Stock Exchange.

8. A commercial bank or foreign bank branch may only register itself as a special trading member once again after 2 years from the date of voluntary cancellation of its membership or after 3 years from the date of compulsory cancellation of its membership.

Article 24. Registration of market makers

1. A trading member or special trading member that is concurrently a clearing member may register itself as a market maker on the basis of a market maker contract with the Stock Exchange.

2. The Stock Exchange may adjust the number of market makers, reject registration of market makers, and refuse to extend market maker contracts.

3. A derivatives market maker registration dossier on the derivatives market must comprise:

a/ An application for registration as a market maker, made according to Form No. 07 provided in the Appendix to this Decree;

b/ A derivatives clearing member certificate granted by the Vietnam Securities Depository and Clearing Corporation;

c/ A written explanation about information technology infrastructure facilities and professional process under guidance of the Stock Exchange.

4. A market maker registration dossier shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered or sent by post to the Stock Exchange.

5. Within 7 working days after receiving a market maker registration dossier:

a/ In case the dossier is complete and valid, the Stock Exchange shall request in writing the registering institution to organize testing of the market maker function;

b/ In case the dossier is incomplete and invalid, the Stock Exchange shall request in writing the registering institution to modify or supplement the dossier.

6. After a member completes testing its price quotation function to serve market making activities, the Stock Exchange shall issue a notice of in-principle approval of the market maker for the latter to make preparations for market making activities at the request of the Stock Exchange.

7. Within 5 working days after a member completes preparations for market making activities, the Stock Exchange shall issue a decision to approve market maker status of, and disclose information on, the new member in its information disclosure media.

8. The Stock Exchange shall disapprove market maker status in the following cases:

a/ The registering institution fails to satisfy conditions for becoming a market maker;

b/ The market maker registration dossier contains a forged document or untruthful information;

c/ The member fails to comply with Clause 6 of this Article within 30 days after being approved in principle as a market maker;

d/ The member fails to complete procedures for being approved as a market maker within 90 days after the Stock Exchange receives a complete and valid dossier.

The Stock Exchange shall notify in writing the registering institution of reason(s) for disapproving the membership and disclose information in its information disclosure media.

9. The cessation of market making activities of market makers, termination or cancellation of membership of market makers, handling of violations committed market makers, and other activities related to market makers must comply with regulations of the Minister of Finance and the Stock Exchange.

Article 25. Rights and obligations of trading members, special trading members and market makers

1. Rights and obligations of trading members:

a/ To execute trading orders of investors after making sure that investors have trading accounts and margin accounts and have made full margins upon request of clearing members; to provide investors on a regular basis or upon their request with adequate information on activities on trading accounts; 

b/ Trading members that have their membership suspended or cancelled are obliged to reach agreement on establishing replacing trading members and provide all necessary information on investors to the replacing trading members and continue performing their obligations until the handover of rights and obligations to the replacing trading members is completed;

c/ Other rights and obligations provided in Clauses 2 and 3, Article 47 of the Law on Securities and guiding documents.

2. Rights and obligations of special trading members:

a/ To invest in derivatives based on underlying assets being governmental bonds for themselves;

b/ Other rights and obligations provided in Clauses 2 and 3, Article 47 of the Law on Securities and guiding documents.

3. Rights and obligations of market makers:

a/ To enjoy incentives as agreed upon with the Stock Exchange in accordance with law;

b/ To open market maker accounts separately from dealing accounts and trading accounts of investors;

c/ To make quotations under regulations of the Stock Exchange.

Article 26. Contracts on opening of derivatives trading accounts

1. Trading members shall request investors to provide adequate and accurate know-your-customer information before entering into contracts to open derivatives trading accounts for investors.

2. A contract on opening of a derivatives trading account must have the following principal contents on clearing and payment entrustment:

a/ The terms stating that the clearing member may use collaterals of the investor to make margins at the Vietnam Securities Depository and Clearing Corporation for open positions of the investor; and may close positions and use collaterals of the investor in case the investor is insolvent;

b/ Risks occurring in case the clearing member is insolvent, subject to operation cessation or suspension or dissolved or falls bankrupt.

3. The model contract on opening of a derivatives trading account for investors shall be issued by the Minister of Finance.

Chapter IV

DERIVATIVES CLEARING AND PAYMENT

Section 1

ORGANIZATION OF DERIVATIVES CLEARING AND PAYMENT

Article 27. Organization of derivatives clearing and payment

1. A transaction in a listed derivative as specified at Point a, Clause 1, Article 14 of this Decree may be cleared or paid under the  central counterparty mechanism through the Vietnam Securities Depository and Clearing Corporation.

2. An agreement-based transaction in a derivative as specified at Point b, Clause 1, Article 14 of this Decree may be cleared or paid under the central counterparty mechanism through the Vietnam Securities Depository and Clearing Corporation under a service provision contract between the Vietnam Securities Depository and Clearing Corporation and parties to the transaction.

Article 28. Rights of the Vietnam Securities Depository and Clearing Corporation regarding derivatives clearing and payment

1. To clear and pay for derivatives transactions; to issue professional regulations after obtaining approval from the State Securities Commission of Vietnam.

2. To accept or reject registration, suspend or cancel membership of clearing members.

3. In case a clearing member has its membership suspended or cancelled and therefore cannot perform the agreement and establish a replacing clearing member, to designate a replacing clearing member to take over the rights and obligations of such member.

4. Rights of the Vietnam Securities Depository and Clearing Corporation toward clearing members:

a/ To request clearing members to make margins and contribute to the clearing fund;

b/ To request clearing members to fully, promptly and specifically report on trading and payment clearing activities, margin accounts and collaterals of investors;

c/ To determine margin types, adjust margin levels and the list of assets accepted as collaterals;

d/ To determine and adjust position limits;

dd/ To exercise reciprocal transactions and change positions under names of insolvent or bankrupt clearing members to replacing clearing members in order to close such positions;

e/ To determine compensation value and method in case a clearing member has insufficient money to pay or has insufficient securities to transfer;

g/ To refuse positions for invalid transactions under regulations of the Minister of Finance.

5. To carry out the following activities in order to protect investors and market safety:

a/ To refuse positions for transactions exercised after notifying such to the Stock Exchange for cessation of transactions of clearing members and non-clearing trading members that have clearing and payment entrustment contracts with such clearing members (if any);

b/ To close or liquidate positions under names of insolvent clearing members, including positions of such clearing members and of insolvent investors;

c/ To use, sell or transfer collaterals of insolvent clearing members and investors to perform payment obligations of the insolvent clearing members;

d/ To use contributions of clearing members to the clearing fund to secure payment and offset its financial losses (if any);

dd/ To transfer collaterals and open positions of clients to replacing clearing members under Point h, Clause 2, Article 31 of this Decree. If impossible to do so, to close or liquidate positions; to use, sell or transfer assets of clients it has received from insolvent clearing members as collaterals to perform such clients’ obligations or offset financial losses arising from open positions of clients. Collaterals of clients may only be used to perform financial obligations arising from derivatives transactions of such clients;

e/ To act as the creditor with regard to receivables of clearing members and be the first to receive divided assets in accordance with the law on bankruptcy in case such clearing members fall bankrupt;

g/ To request other clearing members to exercise reciprocal transactions to close positions under names of insolvent or bankrupt clearing members, regardless of whether such positions are open positions of insolvent clearing members or investors.

6. To provide the service of managing margin accounts and collaterals to clearing members, non-clearing members and clients of non-clearing members, ensuring separate management of accounts and investment portfolios of clients.

7. To request the Stock Exchange and clearing members to promptly and adequately provide information on transactions of such members and investors.

8. To exercise other rights provided in Clause 1, Article 55 of the Law on Securities and other relevant laws.

Article 29. Obligations of the Vietnam Securities Depository and Clearing Corporation regarding derivatives clearing and payment

1. To ensure information technology and technical infrastructure systems for derivatives clearing and payment; to organize and supervise derivatives clearing and payment to ensure safety, efficiency, fairness and impartiality.

2. To establish and operate a risk management system, and formulate a payment security mechanism for derivatives clearing and payment activities.

3. To inspect and supervise clearing members in complying with regulations of the Vietnam Securities Depository and Clearing Corporation and relevant regulations; to promptly, fully and accurately report on derivatives clearing and payment activities and operations of clearing members to the State Securities Commission of Vietnam under regulations, or when so requested or detecting a violation.

4. To coordinate with and guide clearing members in resolving matters related to derivatives clearing and payment activities. 

5. In derivatives clearing and payment activities, to fulfill its obligations and commitments only to clearing members, not to third parties.

6. To establish a system to manage accounts and assets of clearing members separately from its own accounts and assets; to separately manage accounts and assets of clearing members; to separately manage accounts and assets of clearing members and their clients.

7. To manage and use the clearing fund and operational risk provision fund in accordance with law.

8. Other obligations provided in Clause 2, Article 55 of the Law on Securities and other relevant laws.

Article 30. Registration of clearing members           

1. A securities company, commercial bank or foreign bank branch that wishes to register itself as a clearing member of the Vietnam Securities Depository and Clearing Corporation must satisfy the following conditions:

a/ Having a derivatives clearing and payment service provision eligibility certificate granted by the State Securities Commission of Vietnam;

b/ Being a trading member or special trading member on the derivatives market of the Stock Exchange;

c/ Meeting requirements of the Vietnam Securities Depository and Clearing Corporation on information technology infrastructure and professional process for derivatives clearing and payment activities.

2. A clearing member registration dossier must comprise:

a/ A written request for registration of a clearing member on the derivatives market, made according to Form No. 08 provided in the Appendix to this Decree;

b/ A derivatives clearing and payment service provision eligibility certificate granted by the State Securities Commission of Vietnam; 

c/ A decision on approval of clearing member status or a decision on approval of special clearing member status, issued by the Stock Exchange;

d/ A written explanation about satisfaction of requirements on information technology infrastructure and professional process as guided by the Vietnam Securities Depository and Clearing Corporation.

3. A clearing member registration dossier shall be made in 1 original set. In case a document included in the dossier is a copy, such copy shall be made from the master register or certified. Such a dossier shall be hand-delivered or sent by post to the Vietnam Securities Depository and Clearing Corporation.

4. Within 7 working days after receiving a complete and valid clearing member registration dossier, the Vietnam Securities Depository and Clearing Corporation shall issue a written in-principle approval of clearing member registration to the registering institution and request the latter to make preparations for organization of derivatives clearing and payment activities. In case such a dossier is incomplete and invalid, the Vietnam Securities Depository and Clearing Corporation shall request in writing the registering institution to modify and supplement it.

5. Within 1 working day after the registering institution completes preparations as requested by the Vietnam Securities Depository and Clearing Corporation, the latter shall grant a clearing member certificate.

6. The Vietnam Securities Depository and Clearing Corporation shall disapprove clearing member status in the following cases:

a/ The registering institution fails to satisfy conditions for becoming a clearing member;

b/ The clearing member registration dossier contains a forged document or an untruthful information;

c/ The registering institution fails to complete procedures for being granted a clearing member certificate within 90 day after the Vietnam Securities Depository and Clearing Corporation issues a notice of in-principle approval of clearing member registration.

The Vietnam Securities Depository and Clearing Corporation shall send a written reply to the registering institution, clearly stating the reason for disapproval, and disclose information in its information disclosure media.

7. Cessation of derivatives clearing and payment activities of clearing members, termination or cancellation of clearing member status, handling of violations committed by clearing members, and other activities related to clearing members must comply with regulations of the Minister of Finance and the Vietnam Securities Depository and Clearing Corporation.

8. A securities company, commercial bank or foreign bank branch may only register itself as a clearing member again after 2 years from the date of voluntary cancellation of its membership or after 3 years from the date of compulsory cancellation of its membership.

Article 31. Rights and obligations of clearing members 

1. Rights of clearing members:

a/ To request investors to promptly and fully make margins before placing orders; to determine margin levels depending on the nature and size of client transactions, ensuring that these levels are not lower than the minimum margin level set out by the Vietnam Securities Depository and Clearing Corporation; to select types of securities to be used as collaterals from the list of assets acceptable as collaterals; to determine methods and period of making and adding margins, changing margin securities and transferring collaterals in accordance with law.

b/ In case investors are insolvent, clearing members may:

- Request such investors to carry out compulsory closure or liquidation of open positions of investors. In case investors fail to do so, clearing members may carry out by themselves compulsory closure or liquidation of open positions of investors;

- Use, sell or transfer collaterals of such investors as security assets or buy security assets for loans for performing payment obligations for open positions of investors;

c/ To use collaterals of investors to perform the margin obligation toward the Vietnam Securities Depository and Clearing Corporation for positions of such investors on the principles provided in Clause 2, Article 33 of this Decree; to use collaterals of investors to secure and make payments regarding positions of investors whom they represent;

d/ A clearing member that performs contractual obligations for another clearing member whose membership is suspended or cancelled under Clause 3, Article 28 of this Decree may receive investors’ collaterals transferred by the latter for management.

2. Obligations of clearing members:

a/ To act as authorized representatives of clients and fulfill on clients’ behalf all obligations toward the Vietnam Securities Depository and Clearing Corporation.

b/ To contribute to the clearing fund; to full and promptly make margins at the Vietnam Securities Depository and Clearing Corporation for their own and their clients’ open positions; to provide professional assistance under the guidance of the Vietnam Securities Depository and Clearing Corporation for a clearing member or an investor that falls insolvent or bankrupt;

c/ To establish and maintain an internal control system, a system and procedures for risk management in each business operation; to establish and operate an account system to separately manage assets and trading positions of investors and those of investors and clearing members;

d/ To determine position profits and losses, calculate margin levels and value of collaterals for trading accounts of investors; to request investors to promptly and fully add margins; to refund collaterals in excess of the margin level as requested by investors; to supervise and manage positions and collaterals of investors in accordance with law;

dd/ To pay compensations to investors in case they fail to perform obligations provided by law, causing damage to lawful interests of investors, at levels agreed upon with investors;

e/ To provide the Vietnam Securities Depository and Clearing Corporation with copies of clearing and payment entrustment contracts; to keep all primary-source documents on derivatives clearing and payment; to promptly, fully and accurately provide information on open positions and collaterals of investors and documents related to transactions, clearing and payment at the request of the Vietnam Securities Depository and Clearing Corporation;

g/ To promptly and fully pay to the Vietnam Securities Depository and Clearing Corporation service charges and other expenses under regulations;

h/ A clearing member whose membership is suspended or cancelled shall transfer all collaterals and open positions of clients and provide all client-related necessary information to the replacing clearing member and continue performing its obligations until completing the handover of rights and obligations to the replacing clearing member;

i/ To disclose information and make reports under regulations; to provide, on a regular basis or at the request of investors, all information on activities on margin accounts, margin account balance, and make statements of margin accounts for investors.

3. To exercise other rights and perform other obligations under Clauses 4 and 5, Article 56 of the Law on Securities and guiding documents.

Section 2

DERIVATIVES CLEARING AND PAYMENT

Article 32. Principles of derivatives clearing and payment      

1. The Vietnam Securities Depository and Clearing Corporation shall ensure ability of clearing members to clear and pay for derivatives transactions through the risk hedging mechanism provided in Article 35 of this Decree and provisions of relevant laws.

2. The payment and account-finalization of monetary derivatives transactions between the Vietnam Securities Depository and Clearing Corporation and clearing members shall be carried out in the form of account transfer via payment banks in accordance with law. The transfer of underlying assets being securities traded on the Stock Exchange shall be carried out on the system of depository accounts at the Vietnam Securities Depository and Clearing Corporation.

Article 33. Management of margin accounts and collaterals of clearing members

1. Clearing members shall fully and promptly make margins on accounts held by the Vietnam Securities Depository and Clearing Corporation. Collaterals of clearing members include money, securities and other assets eligible for use as collaterals under regulations of the Vietnam Securities Depository and Clearing Corporation.

2. Margin making by clearing members shall be carried out for all open positions under their names, including their own and investors’ open positions, on the following principles:

a/ Margin levels shall be calculated by the Vietnam Securities Depository and Clearing Corporation for open positions on collateral accounts of investors and clearing members in order to determine margin levels required for investor accounts of clearing members;

b/ Assets deposited by investors as collaterals with clearing members under Clauses 1, 2 and 3, Article 34 of this Decree may only be used by clearing members to make margins for positions of such investors but not for other investors or for their own positions.

3. On a daily basis and in trading sessions with large securities price fluctuations, the Vietnam Securities Depository and Clearing Corporation shall determine required margin levels on accounts of investors and clearing members, and determine the total collateral value required to be deposited by clearing members and supplemented collateral value of clearing members (if any).

4. Clearing members shall add margins or close part or the whole of positions at the request of the Vietnam Securities Depository and Clearing Corporation. In case a clearing member fails to promptly and fully add the margin, the Vietnam Securities Depository and Clearing Corporation may close part or the whole of positions under the name of such clearing member, including positions of such clearing member and the investor that fails to promptly and fully add the margin.

5. In case the collateral value of an investor or a clearing member is larger than the margin level required by the Vietnam Securities Depository and Clearing Corporation, such clearing member may withdraw part of collaterals under guidance of the Vietnam Securities Depository and Clearing Corporation.

6. Margin types, margin level determination method, margin making method and period, margin addition, transfer of collaterals, collateral valuation method, determination of position profits and losses, and management of margin accounts and collaterals of clearing members must comply with guidance of the Minister of Finance and regulations of the Vietnam Securities Depository and Clearing Corporation.

Article 34. Management of margin accounts and collaterals of investors

1. Investors shall promptly and fully make margins for clearing members under clauses and terms of contracts on opening of derivatives trading accounts. Collaterals must be on the list of assets acceptable by clearing members as collaterals.

2. On a daily basis and in trading sessions with large securities price fluctuations, clearing members shall calculate position profits and losses and revaluate collaterals, ensuring that investors always maintain margin levels as agreed upon in contracts and in accordance with law. 

3. At the request of clearing members, investors shall add margins under regulations of the Minister of Finance. In case investors fail to promptly and fully add margins as requested, clearing members may apply Point b, Clause 1, Article 31 of this Decree. In case an investor’s collateral value is larger than the margin level required by a clearing member, such investor may withdraw part of its/his/her collaterals.

4. Clearing members shall separately manage margin accounts and collaterals of investors and separately from their own margin accounts and collaterals on the following principles:

a/ For monetary collaterals, clearing members shall open deposit accounts at banks and separately manage margin money of investors. Clearing members shall coordinate with such banks and request the latter to promptly, fully and accurately provide monetary balances of accounts of investors;

b/ for securities collaterals, clearing members shall manage them on depository accounts of investors at the Vietnam Securities Depository and Clearing Corporation.

5. In case clearing members fall bankrupt in accordance with the law on bankruptcy, collaterals of investors are not assets of clearing members and may neither be used for disposal in accordance with the law on bankruptcy nor divided in any form to creditors of clearing members or to shareholders or capital contributing members of companies. Such collaterals may only be used to pay or secure payment regarding obligations arising from open positions of investors. Assets left after the payment obligation of investors is fulfilled shall be immediately returned to such investors.

6. The management of accounts and collaterals of investors must comply with regulations of the Minister of Finance.

Article 35. Risk hedging mechanism at the Vietnam Securities Depository and Clearing Corporation

1. The Vietnam Securities Depository and Clearing Corporation may apply the following measures to hedge risks for the payment system and protect investors:

a/ Determining and adjusting margin levels under regulations;

b/ Requesting clearing members to make contributions to the clearing fund;

c/ Determining and adjusting position limits applicable to clearing members and investors;

d/ Partially or wholly closing open positions of insolvent investors and clearing members;

dd/ Using the clearing fund and taking other measures specified in Clause 5, Article 28 of this Decree.

2. The Vietnam Securities Depository and Clearing Corporation shall guide risk hedging measures after obtaining approval from the State Securities Commission of Vietnam.  

Article 36. Coordination between the Stock Exchange and the Vietnam Securities Depository and Clearing Corporation

Within the scope of their operation, the Stock Exchange and Vietnam Securities Depository and Clearing Corporation shall coordinate in:

1. Guiding the provisions of Clause 1, Article 15 of this Decree regarding derivatives listed on the Stock Exchange.

2. Granting identification numbers to investors, trading codes and International Securities Identification Numbers (ISINs) for derivatives.

3. Handling the case in which a securities company, commercial bank or foreign bank branch is suspended from trading or has its trading member status or special trading member status at the Stock Exchange cancelled, or is suspended from derivative payment clearing activities or has its clearing member status at the Vietnam Securities Depository and Clearing Corporation cancelled.

4. Establishing and managing position limits, determining payment prices, sharing information and carrying out supervision and other activities when necessary.  

Chapter V

REPORTING REGIME AND OBLIGATION TO DISCLOSE INFORMATION

Article 37. Reporting regime

1. The Stock Exchange, Vietnam Securities Depository and Clearing Corporation, derivative business institutions, derivatives clearing and payment service providers, trading members, special trading members, market makers and clearing members shall keep all documents on their transactions and business operations.

2. The Stock Exchange, Vietnam Securities Depository and Clearing Corporation, derivatives business institutions and derivatives clearing and payment service providers shall, on a regular basis or an extraordinary basis or at the request of the State Securities Commission of Vietnam, report on derivatives business activities, derivatives clearing and payment activities and transactions to the State Securities Commission of Vietnam.

3. The Stock Exchange, Vietnam Securities Depository and Clearing Corporation, derivatives business institutions, derivatives clearing and payment service providers, trading members, special trading members, market makers and clearing members shall promptly, adequately and accurately provide information and documents and make explanations at the request of the State Securities Commission of Vietnam.

4. Trading members, special trading members, market makers and clearing members shall report to the Stock Exchange and Vietnam Securities Depository and Clearing Corporation under the latter’s regulations.

5. Organizations and individuals engaged in derivatives trading, derivatives business or provision of derivatives clearing or payment services shall promptly, adequately and accurately provide information, documents and data related to derivatives transactions and make explanations about related cases and matters at the request of the State Securities Commission of Vietnam, Stock Exchange and Vietnam Securities Depository and Clearing Corporation.

6. The subjects specified in Clauses 1, 2 and 3 of this Article shall comply with the reporting regime in accordance with law.

Article 38. Obligation to disclose information

Information disclosure by subjects investing in and operating on the derivatives market must comply with law.

Chapter VI

MANAGEMENT AND SUPERVISION OF THE DERIVATIVES MARKET

Article 39. Supervision by the State Securities Commission of Vietnam

1. To supervise derivatives transactions; to supervise derivative-related operations and the derivatives market of the Stock Exchange and Vietnam Securities Depository and Clearing Corporation in accordance with regulations of the Minister of Finance.

2. To supervise the observance of regulations on securities by derivatives business institutions, derivatives clearing and payment service providers, trading members, special trading members, market makers and clearing members.

3. To supervise the organization of implementation of processes, regulations and internal regulations on risk management and internal control in trading and provision of services to investors by derivatives business institutions and derivatives clearing and payment service providers.

4. To supervise the maintenance of operation conditions by derivatives business institutions and derivatives clearing and payment service providers; the observance of this Decree’s provisions on restrictions on operation and protection of rights and interests of investors and other relevant provisions of the law on securities and the securities market.

5. To supervise the separate management of accounts and assets of investors from accounts and assets of derivatives business institutions and derivative clearing and payment service providers under this Decree and relevant legal documents.

6. To supervise the archive and management of trading data and performance of the obligation to report and disclose information.

Article 40. Supervision by the Stock Exchange

1. The Stock Exchange shall supervise:

a/ The observance of the law on securities and relevant regulations by trading members, special trading members and market makers;

b/ Trading activities of institutions and individuals on the Stock Exchange in order to detect and prevent abnormal transactions and transactions showing signs of violation of the law on securities.

2. The Stock Exchange shall develop and promulgate a system of criteria for supervision of derivatives transactions after obtaining approval from the State Securities Commission of Vietnam.

Article 41. Supervision by the Vietnam Securities Depository and Clearing Corporation

1. The Vietnam Securities Depository and Clearing Corporation shall:

a/ Supervise clearing members in the observance of the law on securities and other relevant regulations ; and manage and supervise the maintenance of margin levels under regulations;

b/ Supervise investors in the compliance with regulations on position limits of investors when exercising derivatives transactions. 

2. Upon detecting abnormal signs in derivatives clearing and payment activities or signs of insolvency of investors or clearing members, the Vietnam Securities Depository and Clearing Corporation shall warn and request clearing members to explain, provide relevant documents and information, and promptly report to the State Securities Commission of Vietnam.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 42. Effect

1. This Decree takes effect on January 1, 2021, and replaces the Government’s Decree No. 42/2015/ND-CP of May 5, 2015, on derivatives and the derivatives market.

2. The Stock Exchange and Vietnam Securities Depository and Clearing Corporation shall continue implementing this Decree’s provisions on professional operations which apply to them until the Vietnam Exchange and Vietnam Securities Depository and Clearing Corporation officially commence their operation in accordance with Law No. 54/2019/QH14 on Securities.

Article 43. Organization of implementation

1. The Minister of Finance shall guide the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and chairpersons of provincial-level People’s Committees shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC

* The Appendix to this Decree is not translated.