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THE GOVERNMENT |
THE SOCIALIST REPUBLIC OF VIET NAM |
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No.: 158/2020/ND-CP |
Hanoi, December 31, 2020 |
DECREE
ON DERIVATIVES AND DERIVATIVE MARKET
Pursuant to the Law on Government Organization dated June 19, 2015 and the Law on Amendments to the Law on Government Organization and the Law on Local Government Organization dated November 22, 2019;
Pursuant to the Law on Securities dated November 26, 2019;
Pursuant to the Law on Enterprises dated June 17, 2020;
At the request of the Minister of Finance;
The Government promulgates a Decree on derivatives and derivative market;
Chapter I
GENERAL PROVISIONS
Article 1. Scope
This Decree deals with derivatives and derivative market in Vietnam.
Article 2. Regulated entities
1. Vietnamese and foreign organizations and individuals that invest in derivatives and operate in the derivative market of Vietnam.
2. Securities authorities.
3. Other organizations and individuals involved in derivative investment and trading and the derivative market of Vietnam.
Article 3. Definitions
For the purposes of this Decree, the terms below are construed as follows:
1. “derivative trading” means the conduct of one, several or all of the following operations: derivative brokerage, derivative proprietary trading, and derivative investment consulting.
2. “position” means the trading status and volume of an unexpired derivative held by an investor at a given time. When an investor buys or sells a derivative, he/she is said to be opening a long position or short position of that derivative.
3. “open position” means a situation in which an investor is holding unexpired derivatives.
4. “net position” of a derivative at a given time means the difference between total open long and open short positions in that derivative at the same time.
5. “position limit” means the maximum position in a derivative, or in that derivative and other derivatives having the same underlying asset that an investor has the right to hold at a given time.
6. “order limit” means the maximum amount of derivatives to be traded by placing an order.
7. “trading member” means a securities company that is recognized by Stock Exchange (SE) as a trading member to trade derivatives.
8. “special trading member” means a commercial bank or foreign bank branch (FBB) recognized by SE as a special trading member to trade government bond derivatives.
9. “market maker” means a trading member or a special trading member licensed to perform market making operations for one or several derivative(s).
10. “clearing member” means a securities company, commercial bank or FBB recognized by Vietnam Securities Depository and Clearing Corporation (VSDCC) as a clearing member to make clearing and settlement for derivative transactions.
11. “general clearing member” means a clearing member licensed to make clearing and settlement for its own derivative transactions and derivative transactions of its clients, and provide derivative clearing and settlement services for non-clearing members and their clients.
12. “direct clearing member” means a clearing member only licensed to make clearing and settlement for its own derivative transactions or for derivative transactions of that clearing member and its clients.
13. “non-clearing member” means a trading member or special trading member that is not a clearing member.
14. “market making” means the conduct of buying and selling transactions to create liquidity for one or several derivatives traded on SE.
15. “clearing and settlement entrustment contract” means a contract under which a non-clearing member entrusts a general clearing member to perform fiduciary duties to make clearing and settlement for its own derivative transactions or derivative transactions of its clients.
16. “margin” means money, securities and other assets, as prescribed by VSDCC, which are used for ensuring the settlement for derivative transactions by investors and clearing members.
17. “margin account” means an investor’s or clearing member’s account opened for managing positions, margins and making settlement for derivative transactions.
18. “clearing and settlement” for a derivative transaction mean the acts of making margin, verifying trading results, rectifying errors, novating, clearing, determining settlement obligations, transferring money or money and underlying assets on the settlement date.
19. “central counterparty clearing” means the clearing and settlement for a derivative transaction performed by VSDCC, in which VSDCC, by means of novation, becomes a party of that derivative transaction of which the other party is a clearing member.
20. “novation” means the replacement of one of the parties of a derivative contract or transaction with another party whereby the new party shall inherit all rights and obligations related to that derivative contract or transaction of the replaced one.
Chapter II
DERIVATIVE TRADING ORGANIZATIONS, AND CLEARING AND SETTLEMENT SERVICE PROVIDERS
Section 1. DERIVATIVE TRADING ORGANIZATIONS
Article 4. Requirements for issuance of certificate of eligibility to trade derivatives
1. Securities companies and securities investment fund management companies (hereinafter referred to as “fund management company”) shall only trade derivatives after obtaining certificate of eligibility to trade derivatives from the State Securities Commission of Vietnam (“SSC”):
a) Securities companies may carry out one, several or all of derivative trading operations, including: derivative brokerage, derivative proprietary trading and derivative investment consulting;
b) Fund management companies may only provide derivative investment consulting.
2. In order to be issued with certificate of eligibility to trade derivatives, a securities company is required to meet the following requirements:
a) Be sufficiently licensed to perform securities trading operations;
b) Meet the following charter capital and equity requirements:
- For derivative brokerage: the minimum charter capital or equity is VND 800 billion;
- For derivative proprietary trading: the minimum charter capital or equity is VND 600 billion;
- For derivative investment consulting: the minimum charter capital or equity is VND 250 billion;
- If a securities company engages in all of derivative brokerage, derivative proprietary trading and derivative investment consulting, its minimum charter capital or equity is VND 800 billion;
c) Meet internal control and risk management requirements for securities trading operations in accordance with regulations of law on operations of securities companies;
d) Meet personnel requirements: Director (General Director), Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for each derivative trading operation must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;
dd) Maintain a working capital ratio of at least 220% in the last continuous 12 months; have sufficiently contributed to provisions as prescribed by law;
e) Incur no loss in the last 02 years;
g) Receive unqualified opinions from the accredited audit organizations for the latest audited annual financial statements and the latest reviewed mid-year financial statements (in case an application for certificate of eligibility to trade derivatives is submitted after June 30);
h) It is not following procedures for reorganization, dissolution or bankruptcy; it is not subject to any decision on suspension of business operations issued by competent authorities.
3. In order to be issued with certificate of eligibility to trade derivatives, a fund management company is required to meet the following requirements:
a) Maintain the charter capital or equity of at least VND 25 billion;
b) Arrange Director (General Director) and Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for derivative investment consulting who must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;
c) Meet the requirements in Points dd, e, g, h Clause 2 of this Article.
Article 5. Application and procedures for issuance and revision of certificate of eligibility to trade derivatives
1. An application for issuance of certificate of eligibility to trade derivatives consists of:
a) The application form made using Form No. 01 in the Appendix enclosed herewith;
b) The resolution of the General Meeting of Shareholders, Board of Members or the owner’s decision on conduct of derivative trading operations;
c) The audited financial statements of the last 02 fiscal years and the latest reviewed mid-year financial statements (in case an application for certificate of eligibility to trade derivatives is submitted after June 30); the prudential ratio reports in the last 12 months;
d) List of Director (General Director) and Deputy Director (Deputy General Director) in charge of specific operations and employees for each derivative trading operation which is prepared using Form No. 02 in the Appendix enclosed herewith, enclosed with their personal records. A personal record shall, inter alia, include: ID card or citizen’s identity card or passport, securities professional certificate, professional certificate in derivatives and derivative market, and employment contract;
dd) Internal control and risk management procedures for derivative trading operations.
2. The documents specified in Clause 1 of this Article are not required if they have been sent to SSC in accordance with regulations on reporting and information disclosure.
3. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SSC directly, by post or through the online public service system as regulated by the Minister of Finance.
4. Within 05 business days from the receipt of the application, SSC shall request the applicant in writing to revise the application (if necessary).
5. Within 15 days from the receipt of the adequate and valid application, SSC shall issue the certificate of eligibility to trade derivatives. If an application is refused, SSC shall provide written reasons for such refusal.
6. Within 12 months from the issuance of the certificate of eligibility to trade derivatives, the securities company licensed to provide derivative brokerage shall apply for registration as trading member. If it fails to follow procedures for registration of trading member, SSC shall issue a decision to revoke the certificate of eligibility to trade derivatives.
7. Revision of the certificate of eligibility to trade derivatives due to addition of derivative trading operations shall comply with corresponding regulations on issuance of certificate of eligibility to trade derivatives in Article 4, Clauses 1 through 5 Article 5 hereof.
Article 6. Suspension and resumption of derivative trading operations
1. SSC shall issue a decision to suspend one or some of derivative trading operations of the derivative trading organization for a maximum period of 12 months in the following cases:
a) The securities company fails to meet one or some of the requirements in Points b, c, d, dd Clause 2 Article 4 hereof within 06 consecutive months; the fund management company fails to meet one or some of the requirements in Point dd Clause 2, Points a, b Clause 3 Article 4 hereof within 06 consecutive months;
b) Operations are suspended in accordance with regulations of law.
2. From the receipt of SSC’s decision to suspend derivative trading operation(s):
a) Within 24 hours, the derivative trading organization shall disclose information about the suspension;
b) Within 05 business days, the derivative trading organization shall disclose information about the plan, time limit and roadmap for settling unexpired contracts and notify the plan to each client. The time limit for settling unexpired contracts must include a minimum period of at least 45 days provided for clients to settle their positions and transfer margins to other accounts but shall not exceed 60 days from the date of information disclosure.
3. During the suspension period, the derivative trading organization shall:
a) On a monthly basis or at the request of SSC, submit reports and disclose information about its status and relevant activities; not sign new derivative trading contracts and suspend all derivative trading operations, except the cases specified in Points b, c, d of this Clause;
b) With regard to unexpired derivative trading contracts, the securities company shall:
- Only receive and execute clients’ orders for matched sale-purchase transactions; only receive additional margins from clients;
- Determine account balances and close accounts for clients; liquidate positions and return margins to clients; reach agreements and transfer rights, responsibilities, obligations, accounts, margins and open positions of clients to the substitute securities company at their requests;
- Conduct transactions at the request of VSDCC and SE to reduce clients’ positions;
c) Liquidate or close positions on proprietary trading accounts and market making accounts (if any), and ensure the priority in performing clients’ transactions over its own position-closing transactions;
d) Fully pay taxes, service prices, debts and other financial liabilities related to derivative trading operations (if any).
4. SSC shall issue a decision to allow the derivative trading organization to resume its suspended derivative trading operations only after this organization has successfully rectified the causes of suspension.
Article 7. Voluntary termination of derivative trading operations
1. The derivative trading organization that wishes to terminate its derivative trading operations shall submit an application to SSC. The application consists of:
a) The application form made using Form No. 03 in the Appendix enclosed herewith;
b) The resolution of the General Meeting of Shareholders, Board of Members or the owner’s decision on termination of derivative trading operations and approval for the plan for settlement of relevant issues;
c) The plan for settling unexpired derivative trading contracts, including the plan for settling accounts and margins of clients.
2. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SSC directly, by post or through the online public service system as regulated by the Minister of Finance.
3. Within 05 business days from the receipt of the application, SSC shall request the applicant in writing to revise the application (if necessary).
4. Within 07 business days from the receipt of the adequate and valid application, SSC shall give a written permission to follow procedures for voluntary termination of derivative trading operations. If an application is refused, SSC shall provide written reasons for such refusal.
5. From the receipt of SSC’s permission to follow procedures for voluntary termination of derivative trading operations:
a) Within 24 hours, the derivative trading organization shall disclose information about the following of procedures for voluntary termination of derivative trading operations;
b) Within 05 business days, the securities company shall disclose information about the plan, time limit and roadmap for settling unexpired contracts and notify the plan to each client. The time limit for settling unexpired contracts must include a minimum period of at least 45 days provided for clients to settle their positions and transfer margins to other accounts but shall not exceed 60 days from the date of information disclosure.
6. While following procedures for termination of operations, the derivative trading organization shall:
a) On a monthly basis or at the request of SSC, submit reports and disclose information about its status and relevant activities; not sign new derivative trading contracts; terminate all derivative trading operations, except the cases specified in Points b, c, d of this Clause;
b) With regard to unexpired derivative trading contracts, the securities company shall:
- Only receive and execute clients’ orders for matched sale-purchase transactions; only receive additional margins from clients;
- Determine account balances and close accounts for clients; liquidate positions and return margins to clients; reach agreements and transfer rights, responsibilities, obligations, accounts, margins and open positions of clients to the substitute derivative trading organization;
- Conduct transactions at the request of VSDCC and SE to reduce clients’ positions;
c) Liquidate or close positions on proprietary trading accounts and market making accounts (if any), and ensure the priority in performing clients’ transactions over its own position-closing transactions;
d) Fully pay taxes, service prices, debts and other financial liabilities related to derivative trading operations (if any).
7. Within 05 business days from the completion of procedures as prescribed in Clauses 5, 6 of this Article, the derivative trading organization shall provide SSC with the following documents:
a) List of clients with adequate information about client identification, numbers of derivative trading accounts, and numbers of margin accounts, and list of margins and positions on each account; reasons for failure to close accounts (if any);
b) Record of transfer of all accounts and margins of clients to the substitute clearing member that is required to make certification on this record;
c) Decision to cancel membership of trading member/clearing member;
d) Certification of full payment of taxes, service prices, debts and other financial liabilities related to derivative trading operations.
8. Within 05 business days from the receipt of the documents specified in Clause 7 of this Article, SSC shall revise the certificate of eligibility to trade derivatives (if one or some derivative trading operations are terminated) or issue a decision to revoke the certificate of eligibility to trade derivatives (if all derivative trading operations are terminated). If an application is refused, SSC shall provide written reasons for such refusal.
Article 8. Compulsory termination of derivative trading operations
1. The derivative trading organization is required to terminate derivative trading operations in the following cases:
a) It fails to rectify the causes of suspension of derivative trading operations by the end of suspension period;
b) It is dissolved, declared bankrupt, or has its operations suspended or its license for establishment and operation revoked; the organization established after full or partial division, consolidation or merger fails to meet one of the requirements in Clauses 2, 3 Article 4 hereof.
2. Within 30 days from the day on which the derivative trading organization is determined to fall in one of the cases specified in Clause 1 of this Article, SSC shall request the derivative trading organization in writing to follow procedures for termination of derivative trading operations.
3. From the receipt of SSC’s request for compulsory termination of derivative trading operations, the derivative trading organization shall disclose information and send notification to clients as prescribed in Clause 5 Article 7 hereof.
4. The derivative trading organization shall comply with regulations laid down in Clauses 6, 7 Article 7 hereof for following procedures for termination of derivative trading operations and send reports on results to SSC.
5. Within 05 business days from the receipt of reports on termination of derivative trading operations, SSC shall revise the certificate of eligibility to trade derivatives (if one or some derivative trading operations are terminated) or issue a decision to revoke the certificate of eligibility to trade derivatives (if all derivative trading operations are terminated).
Section 2. CLEARING AND SETTLEMENT SERVICE PROVIDERS
Article 9. Requirements for issuance of certificate of eligibility to provide clearing and settlement services
1. Securities companies, commercial banks and FBBs are allowed to provide clearing and settlement services only after obtaining certificate of eligibility to provide clearing and settlement services from SSC;
a) A securities company is licensed to make clearing and settlement for its own derivative transactions and derivative transactions of its clients, and provide derivative clearing and settlement services for non-clearing members and their clients;
b) A commercial bank or FBB shall only make clearing and settlement for its own derivative transactions.
2. In order to be issued with certificate of eligibility to provide clearing and settlement services, a securities company is required to meet the following requirements:
a) It has been issued with certificate of securities depository registration;
b) It has been licensed to provide derivative brokerage;
c) Meet the following charter capital and equity requirements:
- For a direct clearing member: Maintain the charter capital or equity of at least VND 900 billion;
- For a general clearing member: Maintain the charter capital or equity of at least VND 1.200 billion; d) It has maintained a working capital ratio of at least 260% in the last continuous 12 months; a debt-to-equity ratio shown in the latest financial statements of not exceeding 05 times; and have sufficiently contributed to provisions as prescribed by law;
dd) It has incurred no loss in the last 02 years;
e) Its latest audited annual financial statements and latest reviewed financial statements (in case an application for certificate of eligibility to provide clearing and settlement services is submitted after June 30) have received unqualified opinions from the accredited audit organizations;
g) It has met internal control and risk management requirements in accordance with regulations of law on operations of securities companies;
h) It is not following procedures for reorganization, dissolution or bankruptcy; it is not subject to any decision on suspension of business operations issued by competent authorities.
3. In order to be issued with certificate of eligibility to provide clearing and settlement services, a commercial banks or FBB is required to meet the following requirements:
a) Meet the requirements for provision of clearing and settlement services as regulated in the law on credit institutions;
b) Have a minimum charter capital or equity of VND 5.000 billion (for a commercial bank) or allocated capital of at least VND 1.000 billion (for an FBB);
c) Have satisfactory capital adequacy ratios as prescribed by the Law on credit institutions in the last 12 months;
d) Meet the requirements in Points a, h Clause 2 of this Article.
Article 10. Application and procedures for issuance of certificate of eligibility to provide clearing and settlement services
1. An application for certificate of eligibility to provide clearing and settlement services consists of:
a) The application form made using Form No. 04 in the Appendix enclosed herewith;
b) The resolution of the General Meeting of Shareholders, Board of Members or the owner’s decision on provision of derivative clearing and settlement services;
c) The audited financial statements of the last 02 fiscal years and the latest reviewed mid-year financial statements (in case an application for certificate of eligibility to trade derivatives is submitted after June 30); the prudential ratio reports in the last 12 months (for a securities company) or documents proving the satisfaction of capital adequacy ratios (for a commercial bank or FBB);
d) Internal control and risk management procedures for derivative clearing and settlement services;
dd) SBV’s approval given to the commercial bank or FBB for provision of derivative clearing and settlement services in accordance with regulations of law on credit institutions.
2. The documents specified in Clause 1 of this Article are not required if they have been sent to SSC in accordance with regulations on reporting and information disclosure.
3. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SSC directly, by post or through the online public service system as regulated by the Minister of Finance.
4. Within 05 business days from the receipt of the application, SSC shall request the applicant in writing to revise the application (if necessary).
5. Within 15 days from the receipt of the adequate and valid application, SSC shall issue the certificate of eligibility to provide derivative clearing and settlement services. If an application is refused, SSC shall provide written reasons for such refusal.
6. Within 12 months from the date of issuance of the certificate of eligibility to provide derivative clearing and settlement services, the certificate holder is required to apply for clearing member registration. If it fails to follow procedures for clearing member registration, SSC shall issue a decision to revoke the certificate of eligibility to provide derivative clearing and settlement services.
Article 11. Suspension and resumption of clearing and settlement services
1. SSC shall issue a decision to suspend clearing and settlement services rendered by the clearing and settlement service provider for a maximum period of 12 months in the following cases:
a) The securities company fails to meet the requirements in Points c, d Clause 2 Article 9 hereof within 06 consecutive months; the commercial bank or FBB fails to meet the requirements in Points b, c Clause 3 Article 9 hereof within 06 consecutive months;
b) Operations are suspended in accordance with regulations of law.
2. The clearing and settlement service provider whose clearing and settlement services are suspended shall implement and adopt the measures prescribed in Clauses 2, 3 Article 6 hereof.
3. SSC shall issue a decision to allow the clearing and settlement service provider to resume its suspended clearing and settlement services only after it has successfully rectified the causes of suspension.
Article 12. Voluntary termination of clearing and settlement services
1. The clearing and settlement service provider that wishes to terminate its provision of clearing and settlement services shall submit an application to SSC. The application consists of:
a) The application form made using Form No. 05 in the Appendix enclosed herewith;
b) The resolution of the General Meeting of Shareholders, Board of Members or the owner’s decision on termination of derivative clearing and settlement services and approval for the plan for settlement of relevant issues;
c) The plan for settling unexpired contracts for provision of clearing and settlement services, including the plan for settling accounts and margins of clients.
2. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SSC directly, by post or through the online public service system as regulated by the Minister of Finance.
3. Within 05 business days from the receipt of the application, SSC shall request the applicant in writing to revise the application (if necessary).
4. Within 07 business days from the receipt of the adequate and valid application, SSC shall give a written permission to follow procedures for voluntary termination of derivative clearing and settlement services. If an application is refused, SSC shall provide written reasons for such refusal.
5. From the receipt of SSC's written permission, the clearing and settlement service provider shall implement and adopt the measures prescribed in Clauses 5, 6 Article 7 hereof.
6. Within 05 business days from the completion of procedures as prescribed in Clause 5 of this Article, the clearing and settlement service provider shall provide SSC with the following documents:
a) List of clients with adequate information about client identification, derivative trading accounts, margin accounts, and list of margins and positions on each account; reasons for failure to close accounts (if any);
b) Record of transfer of all accounts and margins of clients to the substitute clearing member that is required to make certification on this record;
c) Decision to cancel membership of clearing member;
d) Certification of full payment of taxes, service prices, debts and other financial liabilities related to provision of derivative clearing and settlement services.
7. Within 05 business days from the receipt of the abovementioned documents, SSC shall issue a decision to revoke the certificate of eligibility to provide clearing and settlement services. If an application is refused, SSC shall provide written reasons for such refusal.
Article 13. Compulsory termination of clearing and settlement services
1. The clearing and settlement service provider is required to terminate its provision of clearing and settlement services in the following cases:
a) It fails to rectify the causes of suspension of clearing and settlement services by the end of suspension period;
b) It is dissolved, declared bankrupt, or has its operations suspended or its license for establishment and operation revoked; or it no longer provides derivative brokerage services; or the organization established after full or partial division, consolidation or merger fails to meet one of the requirements in Clauses 2, 3 Article 9 hereof.
2. Within 30 days from the day on which the clearing and settlement service provider is determined to fall in the case of termination of clearing and settlement services, SSC shall request it in writing to follow procedures for termination of its provision of clearing and settlement services.
3. From the receipt of SSC's written request for termination of clearing and settlement services, the clearing and settlement service provider shall implement and comply with relevant regulations in Clauses 5, 6 Article 7 hereof.
4. Within 05 business days from the completion of procedures as prescribed in Clause 3 of this Article, the clearing and settlement service provider shall submit reports to SSC as prescribed in Clause 6 Article 12 hereof.
5. Within 05 business days from the receipt of reports, SSC shall issue a decision to revoke the certificate of eligibility to provide clearing and settlement services.
Chapter III
DERIVATIVE MARKET
Section 1. DERIVATIVES
Article 14. Derivatives traded on derivative market
1. The following derivatives are traded on the derivative market:
a) Futures and listed options based on underlying assets which are securities, securities indexes or other assets prescribed by the Government upon which the derivative price is based;
b) Forward contracts and options traded by adopting put-through trading method based on underlying assets which are securities and securities indexes on SE.
2. Derivatives traded on SE must bear the following contents:
a) Information about the underlying asset such as name, ticker symbol and other relevant information;
b) Information about the derivative, including: name and extent of the contract, trading method, position limit, trading time limit, maturity date, final settlement date, final trading date, listing date, payment method, bid increment, quotation unit, daily trading limit, method for determination of daily settlement price, final settlement price, reference price, and margin;
c) With regard to options, additional information about the type of option (call or put), style of option (the option is exercised only at the expiration date, or the option is exercised at any time before or at the expiration date), and exercise price must be also provided.
Article 15. Listing of derivatives
1. SE shall cooperate with VSDCC to determine contents of derivatives as prescribed in Clause 2 Article 14 hereof; carry out listing and organize trading of derivatives after obtaining SSC’s approval as prescribed by law.
2. SE shall delist derivatives in the following cases:
a) The derivative becomes due;
b) The underlying asset of the derivative has been delisted or has not been used as the underlying asset;
c) The derivative is delisted in other cases where the delisting is deemed necessary by SSC to protect investors' rights and interests.
3. The delisting of derivatives as prescribed in Point b Clause 2 of this Article must be approved by SSC.
Article 16. Derivative investment
1. Entities are allowed to invest in derivatives on the derivative market, except cases where an entity is banned by a competent authority from performing activities related to securities and securities market for a fixed period or permanently due to commission of securities-related offences, and specific conditional investments as follows:
a) Securities companies shall invest in derivatives only after they have been issued by SSC with certificate of eligibility to conduct derivative proprietary trading;
b) Fund management companies shall only use trusted capital from their investment portfolio management to invest in derivatives for the purpose of preventing risks to list of securities they are holding; and use capital sources of securities investment funds or securities investment companies to invest in derivatives for the purpose of risk prevention as prescribed by the law on securities investment funds. Fund management companies shall not use their own capital, borrowed funds and other lawful funding sources to invest in derivatives;
c) Credit institutions and FBBs shall invest in derivatives only after obtaining written approval from SBV;
d) Insurers and branches of foreign insurers shall only invest in derivatives in accordance with regulations of law on insurance business;
dd) State-owned economic groups, state-owned corporations and state-owned enterprises shall invest in derivatives only after obtaining permission from competent authorities in accordance with regulations of law on management and use of state capital in business operations of enterprises.
2. In the course of investing in or trading derivatives, entities shall themselves be responsible for risks and comply with regulations of law, and avoid committing prohibited acts in accordance with regulations of law on securities and securities market.
Section 2. ORGANIZATION OF DERIVATIVE MARKET
Article 17. Organization of derivative trading
1. SE shall organize a market for the derivatives specified in Clause 1 Article 14 hereof.
2. SE shall organize and operate the derivative market in accordance with regulations of the Law on Securities, this Decree and relevant legislative documents, and its charter.
3. SE may suspend trading of one, some or all of derivatives on the market after obtaining SSC’s approval when one of the following events occurs:
a) The value of underlying asset cannot be determined because of suspended underlying market, or the trading of underlying asset is suspended for 03 business days;
b) The securities trading system or clearing and settlement system faces force majeure events or technically malfunctions;
c) The trading is suspended at the request of SSC to protect the investors’ the lawful rights and interests and ensure the stability and safety of the securities market.
Article 18. Rights of SE to derivative trading
1. Conduct product design and listing, organize trading of listed derivatives, and promulgate operational regulations after obtaining approval from SSC.
2. Approve or refuse the registration, suspend or cancel membership of trading members, special trading members and market makers.
3. If a trading member whose membership is suspended or cancelled is unable to reach an agreement on or decide a substitute trading member, SE is entitled to designate a substitute trading member to receive rights and obligations transferred from that trading member.
4. Request VSDCC to promptly and adequately provide information necessary for performing its tasks of supervising and organizing the derivative market in accordance with regulations of law.
5. Exercise other rights as prescribed in Clauses 1, 4 Article 46 of the Law on Securities and relevant laws.
Article 19. Obligations of SE arising from derivative trading
1. Ensure that information technology and technical infrastructural systems are qualified for operations of the derivative market; organize operations of the derivative market, supervise and disclose information about derivative trading in accordance with regulations of law.
2. Inspect and supervise the maintenance of fulfillment of requirements for membership, compliance with SE’s regulations and relevant laws by trading members, special trading members and market makers; punctually submit comprehensive and accurate reports on operations of the derivative market and members’ activities to SSC as prescribed or upon request or whenever a violation is discovered.
3. Cooperate with VSDCC to ensure the safety and efficiency of trading activities on the derivative market, clearing and settlement for derivative transactions in accordance with regulations of this Decree and relevant legislative documents.
4. Fulfill other obligations as prescribed in Clauses 2, 4 Article 46 of the Law on Securities and relevant laws.
Article 20. Derivative trading
1. Trading of listed derivatives as prescribed in Point a Clause 1 Article 14 hereof shall be conducted through trading members and SE. SE shall organize trading of listed derivatives by employing matching and put-through trading methods.
2. Trading of the derivatives which are traded by employing put-through trading method as prescribed in Point b Clause 1 Article 14 hereof shall be conducted according to agreements between the trading parties and in conformity with relevant laws. After signing and executing contracts, investors must send written notifications to VSDCC.
3. The Minister of Finance shall provide guidance on derivative trading.
Article 21. Market stabilization methods
1. SE shall apply one or some of the following methods to stabilize the market and protect investors according to its regulations:
a) Change the number of trading sessions or trading time;
b) Apply or adjust order limit;
c) Apply daily trading limits or circuit breakers;
d) Limit the opening of new positions;
dd) Suspend or cancel trading orders.
2. SE is entitled to partially or fully suspend or resume derivative trading after obtaining approval from SSC.
Section 3. TRADING MEMBERS, SPECIAL TRADING MEMBERS AND MARKET MAKERS
Article 22. Trading member registration
1. When applying for registration as a trading member on SE, a securities company is required to meet the following requirements:
a) It has been licensed to provide derivative brokerage;
b) It has met the requirements laid down by SE pertaining to information technology infrastructure and operational procedures for derivative trading;
c) It has entered into a clearing and settlement entrustment contract with a general clearing member if it registers as a non-clearing member.
2. An application for registration as a trading member submitted by a securities company consists of:
a) The application form made using Form No. 06 in the Appendix enclosed herewith;
b) Certificate of eligibility to trade derivatives issued by SSC;
c) The description of the applicant’s information technology infrastructure and operational procedure as prescribed by SE;
d) The clearing and settlement entrustment contract signed with a general clearing member in case of registration as a non-clearing member.
3. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SE directly or by post.
4. Within 07 business days from the receipt of the application:
a) If the application is adequate and valid, SE shall request the applicant in writing to develop material facilities and install systems and software programs for transmitting and receiving trading data, testing trading system and performing other preparations for trading;
b) If the application is inadequate or invalid, SE shall request the applicant in writing to revise it.
5. Within 05 business days from the day on which the securities company completes preparations for trading, SE shall issue a decision to grant membership of trading member and disclose information about the new trading member on SE’s media.
6. SE shall refuse to grant membership of trading member in the following cases:
a) The applicant fails to meet membership requirements;
b) The application for registration as trading member contains forged documents or false information;
c) The securities company fails to complete procedures for obtaining a decision to approve membership of trading member within 90 days from the day on which it receives a document from SE as prescribed in Clause 4 of this Article.
SE shall send a notice, in which reasons for refusal must be indicated, to the applicant, and disclose relevant information on its media.
7. The trading member must conduct trading on SE’s derivative trading system within 60 days from the day on which it is granted the trading membership.
8. Suspension of trading activities of a trading member, termination or cancellation of membership of a trading member, actions against violations committed by the trading member and other issues related to the trading member shall comply with the Minister of Finance’s regulations and SE’s regulations.
9. A securities company may apply for re-registration as trading member only after 02 years from the date of voluntary cancellation of membership or 03 years from the date of compulsory cancellation of membership.
Article 23. Special trading member registration
1. A commercial bank or FBB may apply for registration as a special trading member on SE when meeting all of the following requirements:
a) It is a special trading member on the government bond market of SE;
b) It has obtained a written approval from SBV for investment in derivatives;
c) It has entered into a clearing and settlement entrustment contract with a general clearing member in case of registration as a non-clearing member;
d) It has met the requirements laid down by SE pertaining to information technology infrastructure and operational procedures for derivative trading;
dd) It is not following procedures for consolidation, merger, or dissolution; it is not put under control or special control or subject to any decision on suspension of business operations issued by competent authorities.
2. An application for registration as a special trading member consists of:
a) The application form made using Form No. 06 in the Appendix enclosed herewith;
b) The SBV’s written approval for investment in derivatives;
c) The description of the applicant’s information technology infrastructure and operational procedures as prescribed by SE;
d) The clearing and settlement entrustment contract signed with a general clearing member in case of registration as a non-clearing member.
3. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SE directly or by post.
4. Within 07 business days from the receipt of the application:
a) If the application is adequate and valid, SE shall request the applicant in writing to develop material facilities and install systems and software programs for transmitting and receiving trading data, testing trading system and performing other tasks for conducting transactions;
b) If the application is inadequate or invalid, SE shall request the applicant in writing to revise it.
5. Within 05 business days from the day on which the commercial bank or FBB completes preparations for trading, SE shall issue a decision to approve membership of special trading member and disclose information about the new special trading member on its media.
6. SE shall refuse to grant membership of special trading member in the following cases:
a) The applicant fails to meet membership requirements;
b) The application for registration as special trading member contains forged documents or false information;
c) The commercial bank or FBB fails to complete procedures for obtaining a decision to approve membership of special trading member within 90 days from the day on which it receives a document from SE as prescribed in Clause 4 of this Article.
SE shall send a notice, in which reasons for refusal must be indicated, to the applicant, and disclose relevant information on its media.
7. Suspension of trading activities of a special trading member, termination or cancellation of membership of a special trading member, actions against violations committed by the special trading member and other issues related to the special trading member shall comply with the Minister of Finance’s regulations and SE’s regulations.
8. A commercial bank or FBB may apply for re-registration as a special trading member only after 02 years from the date of voluntary cancellation of membership or 03 years from the date of compulsory cancellation of membership.
Article 24. Market maker registration
1. A trading member or special trading member that is also a clearing member may be registered as a market maker according to the market-making contract signed with SE.
2. SE may adjust the number of market makers, refuse to grant membership of market maker or refuse to extend the market making contract.
3. An application for registration as a market maker on the derivative market consists of:
a) The application form made using Form No. 07 in the Appendix enclosed herewith;
b) Certificate of derivative clearing member issued by VSDCC;
c) The description of the applicant’s information technology infrastructure and operational procedures as prescribed by SE.
4. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to SE directly or by post.
5. Within 07 business days from the receipt of the application:
a) If the application is adequate and valid, SE shall request the applicant in writing to test market making functions;
b) If the application is inadequate or invalid, SE shall request the applicant in writing to revise it.
6. After completing the testing for quote function to serve market making activities, SE shall issue a notice of principal approval for membership of market maker to the market maker for making preparations for market making activities as requested by SE.
7. Within 05 business days from the day on which all preparations for market making activities, SE shall issue a decision to approve membership of market maker and disclose information about the new market maker on SE’s media.
8. SE shall refuse to grant membership of market maker in the following cases:
a) The applicant fails to meet membership requirements;
b) The application for registration as market maker contains forged documents or false information;
c) Within 30 days from the date of principal approval for membership of market maker, the market maker is not allowed to perform the contents in Clause 6 of this Article;
d) Within 90 days from the day on which SE receives adequate and valid application, if the applicant fails to complete procedures for approval of membership, SE shall send a notice of refusal, in which reasons for such refusal must be specified, to the applicant and also disclose information on its media.
9. Suspension of market making activities of a market maker, termination or cancellation of membership of a market maker, actions against violations committed by the market maker and other issues related to the market maker shall comply with the Minister of Finance’s regulations and SE’s regulations.
Article 25. Rights and obligations of trading members, special trading members and market makers
1. Rights and obligations of a trading member:
a) Execute trading orders placed by investors after they ensure that these investors have already trading accounts, margin accounts and provided adequate margin as requested by clearing members; provide adequate information about operations carried out on trading accounts for investors on a periodic basis or at their request;
b) The trading member whose membership is suspended or cancelled shall be obliged to agree and decide the substitute trading member, and provide all necessary information about investors for the substitute trading member, and fulfill all of its obligations until the transfer of rights and obligations to the substitute trading member is completed;
c) Perform other rights and obligations as prescribed in Clauses 2, 3 Article 47 of the Law on Securities and its guiding documents.
2. Rights and obligations of a special trading member:
a) Invest in derivatives based on the underlying assets that are government bonds;
b) Perform other rights and obligations as prescribed in Clauses 2, 3 Article 47 of the Law on Securities and its guiding documents.
3. Rights and obligations of a market maker:
a) Enjoy preferences as agreed upon with SE in conformity with regulations of law;
b) Open a market making account which is separate from the proprietary trading account and trading accounts of investors;
c) Provide quotation according to SE’s regulations.
Article 26. Contracts for opening of derivative trading accounts
1. Trading members must request investors to adequately and accurately provide their identity information before entering into contracts for opening of derivative trading accounts.
2. A contract for opening of a derivative trading account shall, inter alia, include the following information about clearing and settlement activities:
a) The clearing member is entitled to use the investor’s margins as margins provided for VSDCC for the investor's open positions; close positions and use margins of the investor that is insolvent;
b) Risks are incurred in the event that the clearing member is incapable of fulfilling settlement obligations or is suspended, dissolved or declared bankrupt.
3. The sample contract for opening of a derivative trading account shall comply with regulations adopted by the Minister of Finance.
Chapter IV
CLEARING AND SETTLEMENT FOR DERIVATIVE TRANSACTIONS
Section 1. ORGANIZATION OF CLEARING AND SETTLEMENT ACTIVITIES
Article 27. Organization of clearing and settlement activities
1. The clearing and settlement for transactions in listed derivatives mentioned in Point a Clause 1 Article 14 hereof shall be made by adopting the central counterparty clearing mechanism through VSDCC.
2. The clearing and settlement for transactions in derivatives which are traded by employing put-through trading method as prescribed in Point b Clause 1 Article 14 hereof shall be made by adopting the central counterparty clearing mechanism through VSDCC according to the service contract signed between VSDCC and trading parties.
Article 28. Rights of VSDCC to clearing and settlement activities
1. Make clearing and settlement for derivative transactions; promulgate operational regulations after obtaining approval from SSC.
2. Grant, refuse, suspend or cancel membership of clearing members.
3. If a clearing member whose membership is suspended or cancelled is unable to reach an agreement on or decide a substitute clearing member, VSDCC is entitled to designate a substitute clearing member to receive rights and obligations transferred from that clearing member.
4. Rights of VSDCC to clearing members:
a) Request clearing members to make margins and make contributions to the clearing fund;
b) Request clearing members to submit adequate, timely and detailed reports on trading, clearing, settlement, accounts and margins of investors;
c) Determine and adjust margins, and list of assets accepted as margins;
d) Determine and adjust position limits;
dd) Execute matched sale-purchase transactions, transfer positions of clearing members that are insolvent or declared bankrupt to substitute clearing members for closing positions;
e) Determine values and methods of compensation in case a clearing member does not have enough money for settlement or securities for transfer;
g) Refuse novation for unlawful transactions as prescribed by the Minister of Finance.
5. Perform the following activities to protect investors and ensure the safety of the market:
a) Refuse novation for transactions which are conducted after VSDCC has given a notification to SE to suspend transactions of a clearing member and a non-clearing trading member that has entered into a clearing and settlement entrustment contract with that clearing member (if any);
b) Close and liquidate positions of a clearing member that is insolvent, including positions of that clearing member and those of its investors;
c) Use, sell and transfer margins of the insolvent clearing member and its investors for fulfilling settlement obligations of that insolvent clearing member;
d) Use amounts contributed to the clearing fund by clearing members for fulfilling settlement obligations and making up financial losses incurred VSDCC (if any);
dd) Transfer margins and open positions of clients to substitute clearing members as prescribed in Point h Clause 2 Article 31 hereof. In case of failure to do so, VSDCC shall close or liquidate positions; use, sell and transfer clients’ assets deposited at VSDCC by the insolvent clearing member for fulfilling clients’ obligations or making up financial losses incurred from clients’ open positions. Margins of clients shall be used only for fulfilling financial obligations arising from their derivative transactions.
e) Where a clearing member goes bankrupt, VSDCC shall be the creditor of amounts receivable from the clearing member, and shall be given priority to receive divided assets in accordance with regulations of the law on bankruptcy;
g) Request other clearing members to conduct matched sale-purchase transactions to close positions of the clearing member that is insolvent or declared bankrupt, irrespective of whether these are open positions of the insolvent clearing member or its investors.
6. Provide account and margin management services for clearing members, non-clearing members and their clients with assurance that accounts and investment portfolios of each client are managed separately.
7. Request SE and clearing members to adequately and punctually provide information about their transactions and transactions of their investors.
8. Exercise other rights as prescribed in Clause 1 Article 55 of the Law on Securities and relevant laws.
Article 29. Obligations of VSDCC in relation to clearing and settlement activities
1. Ensure that information technology and technical infrastructural systems are qualified for performing clearing and settlement activities; organize and supervise clearing and settlement activities to ensure the safety, effectiveness, fairness and objectivity.
2. Establish and operate risk management system, and establish the mechanism for ensuring the fulfillment of settlement obligations during the clearing and settlement process.
3. Examine and supervise clearing members' compliance with VSDCC’s regulations and relevant laws; punctually submit comprehensive and accurate reports on clearing and settlement activities and on operations of clearing members to SSC as prescribed, or as requested, or whenever violation are discovered.
4. Cooperate and instruct clearing members to settle issues concerning their clearing and settlement activities.
5. During the clearing and settlement for derivative transactions, VSDCC shall assume responsibility to fulfill its obligations and commitments to clearing members but take none of responsibilities to any third party.
6. Establish a system for ensuring separate management of accounts and assets of clearing members and VSDCC; separate management of accounts and assets of each clearing member; separate management of accounts and assets of a clearing member and its clients.
7. Manage and use clearing fund and risk management fund in accordance with regulations of law.
8. Fulfill other obligations as prescribed in Clause 2 Article 55 of the Law on Securities and relevant laws.
Article 30. Clearing member registration
1. When applying for registration as a clearing member of VSDCC, a securities company, commercial bank or FBB is required to meet the following requirements:
a) Obtain the certificate of eligibility to provide derivative clearing and settlement services issued by SSC;
b) Be trading member or special trading member on the derivative market of SE;
c) Meet the requirements laid down by VSDCC pertaining to information technology infrastructure and operational procedures for clearing and settlement activities.
2. An application for registration as clearing member consists of:
a) The application form made using Form No. 08 in the Appendix enclosed herewith;
b) The certificate of eligibility to provide derivative clearing and settlement services issued by SSC;
c) Decision to grant membership of trading member or Decision to grant membership of special trading member issued by SE;
d) The description of the applicant’s information technology infrastructure and operational procedures as prescribed by VSDCC.
3. A full set of original application documents is required. If a copy of document is submitted, it must be a copy extracted from master register or a certified copy. The application shall be submitted to VSDCC directly or by post.
4. Within 07 business days from the receipt of the application, if the received application is adequate and valid, VSDCC shall give written principal approval for clearing member registration to the applicant and request the applicant to make preparations for clearing and settlement activities; if the received application is inadequate and invalid, VSDCC shall request the applicant in writing to revise it.
5. Within 01 business day from the day on which the applicant completes all preparations as requested by VSDCC, VSDCC shall issue a certificate of clearing member.
6. VSDCC shall refuse to grant membership of clearing member in the following cases:
a) The applicant fails to meet membership requirements;
b) The application for registration as clearing member contains forged documents or false information;
c) The applicant fails to complete procedures for issuance of certificate of clearing member within 90 days from the day on which VSDCC issues a written principal approval for clearing member registration.
VSDCC shall give a written notice of refusal, in which reasons for refusal must be indicated, to the applicant, and disclose relevant information on its media.
7. Suspension of clearing and settlement activities of a clearing member, termination or cancellation of membership of a clearing member, actions against violations committed by the clearing member and other issues related to the clearing member shall comply with the Minister of Finance’s regulations and VSDCC’s regulations.
8. A securities company, commercial bank or FBB may apply for re-registration as a clearing member only after 02 years from the date of voluntary cancellation of membership or 03 years from the date of compulsory cancellation of membership.
Article 31. Rights and obligations of clearing members
1. Rights of a clearing member:
a) Request investors to provide sufficient margins on a timely manner before placing orders; decide margins according to the nature and scale of each client's transaction provided the margin shall not be lower than the minimum margin required by VSDCC; decide types of securities put up as margins in the list of assets accepted as margins; determine method and time limit for providing margins, changing securities used as margins, transferring margins in accordance with regulations of law;
b) In case an investor is insolvent, the clearing member is entitled to:
- Request the investor to close its positions or compulsorily liquidate its open positions. In case an investor fails to do so, the clearing member shall directly close the investor’s positions and compulsorily liquidate the investor’s open positions;
- Use, sell or transfer the investor’s margins for buying or using them as collateral for loans which are used for fulfilling settlement obligations for the investor's open positions;
c) Use the investor’s margins to fulfill obligations to provide VSDCC with margins for the investor's positions according to the rules in Clause 2 Article 33 hereof; use the investor's margins to fulfill settlement obligations or make payments for the investor’s positions that it is holding in its name;
d) The clearing member that fulfills contract obligations on behalf of the one whose membership is suspended or canceled as prescribed in Clause 3 Article 28 hereof may receive and manage the investor’s margins transferred from the later.
2. Obligations of a clearing member:
a) Act as a representative as authorized by clients, or act on behalf of clients, to fulfill their obligations towards VSDCC;
b) Make contributions to the clearing fund; provide sufficient and timely margins for VSDCC for its open positions and open positions of its clients; implement professional assistance measures according to VSDCC’s instructions in case the clearing member or its investor is insolvent or declared bankrupt;
c) Establish and maintain internal control system, risk management system and procedure for each business operation; establish and operate the account system to separately manage assets and trading positions of each investor and of investors from those of the clearing member;
d) Determine position-based gain or loss, and calculate margins and the value of margins for each trading account of investors; request investors to provide additional margins in a timely and adequate manner; refund the excess amount of margins as requested by investors; supervise and manage positions and margins of investors so as to ensure the compliance with regulations of law;
dd) Make compensation for investors in case the clearing member fails to fulfill its obligations as prescribed by law and thus causes damage to investors’ lawful interests. The level of compensation shall be agreed upon with the relevant investor;
e) Provide VSDCC with the copy of clearing and settlement entrustment contract; adequately retain original documents about clearing and settlement for derivative transactions; adequately, punctually and accurately provide information about open positions and margins of investors and other documents related to derivative trading, clearing and settlement at the request of VSDCC;
g) Fully and punctually pay service charges and other expenses to VSDCC as prescribed;
h) The clearing member whose membership is suspended or canceled shall transfer all margins and open positions of clients, and provide all necessary information about clients for the substitute clearing member, and continue fulfilling its obligations until completing the transfer of its rights and obligations to the substitute clearing member;
i) Disclose information and submit reports as prescribed; provide investors with adequate information about operations on their accounts, margin account balances and statements on a periodical basis or at their request.
3. Perform other rights and obligations as prescribed in Clauses 4, 5 Article 56 of the Law on Securities and its guiding documents.
Section 2. CLEARING AND SETTLEMENT FOR DERIVATIVE TRANSACTIONS
Article 32. Clearing and settlement rules
1. VSDCC shall ensure clearing members’ capability of clearing and settlement for derivative transactions through the risk prevention mechanism as prescribed in Article 35 hereof and relevant laws.
2. Cash payment and settlement for derivative transactions between VSDCC and clearing members shall be performed by transfer through settlement banks in accordance with regulations of law. The transfer of underlying assets which are securities traded on SE shall be carried out through depository accounts opened at VSDCC.
Article 33. Management of clearing members’ accounts and margins
1. Clearing members must provide adequate margins in a timely manner in accounts opened under the name of VSDCC. Margins provided by clearing members include cash, securities and other assets accepted as margins as prescribed by VSDCC.
2. Clearing members must provide margins for all of open positions held under their names, including their own open positions and those of their investors according to the following rules:
a) VSDCC shall calculate the margins required for open positions on each margin account of investors and clearing members so as to determine the required margin on each investor’s account of the clearing member;
b) Assets provided by an investor as margins for a clearing member as prescribed in Clauses 1, 2, 3 Article 34 hereof shall be used as margins for positions of that investor but not for positions of any other investors or that clearing member.
3. On a daily basis and in trading sessions with a considerable fluctuation in securities price, VSDCC shall determine the required margin on each account of investors and on a clearing member’s account, and determine total value of margins to be provided by that the clearing member, and the value of additional margins provided by that clearing member (if any).
4. A clearing member shall provide additional margins or close part or all of its positions at the request of VSDCC. If the clearing member fails to provide the required additional margins in a full and timely manner, VSDCC shall have the right to close part or all of positions held in the name of that clearing member, including positions of that clearing member and investors that fail to fully provide the required additional margins in a timely manner.
5. If the value of margins of investors or clearing members exceeds the one required by VSDCC, clearing members are allowed to withdraw the excess amount of margins according to VSDCC’s instructions.
6. Types of margins, method for determining the required margins, margin method, time limits for providing margins/additional margins, transfer of margins, method for valuation of margins, determination of position-based profit or loss, and management of accounts and margins of clearing members shall comply with regulations adopted by the Minister of Finance and VSDCC.
Article 34. Management of investors’ accounts and margins
1. Investors must provide margins in a full and timely manner for clearing members under the terms and conditions of contracts for opening of derivative trading accounts. Margins provided must be those included in the list of assets accepted as margins by clearing members.
2. On a daily basis and in trading sessions with a considerable fluctuation in securities prices, clearing members shall calculate position- based profit or loss, revaluate margins and ensure that investors maintain their margins as agreed upon in signed contracts and in conformity with regulations of law.
3. Investors shall provide additional margins at the request of clearing members in accordance with regulations adopted by the Minister of Finance. If an investor fails to fully provide the additional margin in a timely manner as required, the clearing member is entitled to take actions as prescribed in Point b Clause 1 Article 31 hereof. If the value of margins provided by the investor exceeds the one required by the clearing member, the investor is allowed to withdraw the excess amount of margins.
4. Clearing members must separately manage accounts and margins of each investor; manage their own accounts and margins separately from those of investors according to the following rules:
a) If margins are provided in cash, clearing members must open deposit accounts at licensed banks, and separately manage deposits provided as margins of each investor. Clearing members shall cooperate with the banks and request them to provide timely, comprehensive and accurate reports on balances on accounts of investors;
b) Clearing members shall manage margins which are securities on investors' depository accounts opened at VSDCC.
5. In case a clearing member is declared bankrupt in accordance with regulations of the Law on bankruptcy, margins of investors shall not be deemed as the clearing member’s assets and cannot be settled in accordance with regulations of the Law on bankruptcy, and shall not be distributed to creditors of the clearing member or shareholders or capital contributors in any forms. These assets shall only be used for paying or ensuring payment obligations for open positions of investors. Assets that remain after investors’ payment obligations have been fulfilled shall be immediately returned to investors.
6. Management of accounts and margins of investors shall comply with regulations adopted by the Minister of Finance.
Article 35. Risk prevention mechanism adopted by VSDCC
1. VSDCC may adopt the following measures to prevent risks to its payment system and protect investors:
a) Determine and adjust statutory margin levels;
b) Request clearing members to make contributions to the clearing fund;
c) Determine and adjust position limits applied to clearing members and investors;
d) Close part or all of open positions of investors or clearing members that are insolvent;
dd) Use the clearing fund and implement other measures as prescribed in Clause 5 Article 28 hereof.
2. VSDCC shall provide guidance on risk prevention measures after obtaining approval from SSC.
Article 36. Cooperation between SE and VSDCC
Within their scope of operations, SE and VSDCC shall cooperate in:
1. Providing guidance on derivatives listed on SE according to Clause 1 Article 15 hereof.
2. Issuing identification numbers to investors, transaction codes, ISINs for derivatives.
3. Taking actions against securities companies, commercial banks or FBBs that are subject to suspension or cancellation of transactions or membership of trading member or special trading member at SE, or clearing and settlement activities or membership of clearing member at VSDCC.
4. Setting and managing position limits, determining settlement prices, sharing information, and performing supervision tasks and other necessary actions.
Chapter V
REPORTING AND INFORMATION DISCLOSURE
Article 37. Reporting
1. SE, VSDCC, derivative trading organizations, clearing and settlement service providers, trading members, special trading members, market makers and clearing members shall retain all documents about their transactions and business operations.
2. On periodical or ad hoc basis or at the request of SSC, SE, VSDCC, derivative trading organizations, and clearing and settlement service providers shall provide SSC with reports on derivative trading, reports on clearing and settlement activities, and reports on transactions.
3. SE, VSDCC, derivative trading organizations, clearing and settlement service providers, trading members, special trading members, market makers and clearing members shall provide information, documents and explanations in a timely, adequate and accurate manner at the request of SSC.
4. Trading members, special trading members, market makers and clearing members shall submit reports to SE and VSDCC according to their regulations.
5. Entities that trade derivatives, conduct derivative transactions, or provide clearing and settlement service shall provide information, documents and data on derivative transactions, and explanations about relevant issues in a timely, adequate and accurate manner at the request of SSC, SE and VSDCC.
6. The entities in Clauses 1, 2, 3 of this Article shall submit reports as prescribed by law.
Article 38. Obligations to disclose information
Information disclosure by the entities investing or engaging in the derivative market shall comply with in accordance with regulations of law.
Chapter VI
MANAGEMENT AND SUPERVISION OF DERIVATIVE MARKET
Article 39. SSC’s supervision
1. Supervise derivative transactions; supervise derivative- and derivative market-related activities of SE and VSDCC according to regulations adopted by the Minister of Finance.
2. Supervise the compliance of derivative trading organizations, clearing and settlement service providers, trading members, special trading members, market makers and clearing members with regulations of the Law on securities.
3. Supervise the implementation of internal procedures, rules and regulations concerning risk management and internal control in business operations and supply of services to investors at derivative trading organizations, and clearing and settlement service providers.
4. Supervise the maintenance of operational conditions by derivative trading organizations, and clearing and settlement service providers; the compliance with regulations on operational limits, protection of rights and interests of investors in accordance with regulations herein and other regulations on securities and securities market.
5. Supervise the separate management of accounts and assets of investors, and derivative trading organizations, and clearing and settlement service providers in accordance with regulations herein and relevant laws.
6. Supervise the retention and management of transaction data; the compliance with regulations on reporting and information disclosure.
Article 40. SE’s supervision
1. The SE’s supervision tasks include:
a) Supervise the compliance of trading members, special trading members and market makers with regulations of the Law on securities and relevant laws;
b) Supervise trading operations of entities that take place on SE in order to detect and prevent transactions with signs of abnormality or violations against regulations of the Law on securities.
2. SE shall formulate and promulgate criteria for supervision of derivative transactions after obtaining approval from SSC.
Article 41. VSDCC’s supervision
1. VSDCC’s supervision tasks include:
a) Supervise the compliance of clearing members with regulations of the Law on securities and relevant laws; manage and supervise their maintenance of required margins as prescribed;
b) Supervise the compliance of investors with position limits during their participation in derivative trading.
2. In case there is any sign of abnormality in clearing and settlement activities or any sign that investors or clearing members are insolvent, VSDCC shall give warning and request the clearing members to provide explanations, and relevant documents and information, and promptly report to SSC.
Chapter VII
IMPLEMENTATION
Article 42. Effect
1. This Decree comes into force from January 01, 2021 and supersedes the Government’s Decree No. 42/2015/ND-CP dated May 05, 2015 on derivatives and derivative market.
2. Regulations on specialized operations herein applicable to SE and VSDCC shall be implemented by SE and Vietnam Securities Depository (VSD) until Vietnam Exchange (VNX) and VSDCC start to officially operate under regulations of the Law on securities No. 54/2019/QH14.
Article 43. Implementation organization
1. The Minister of Finance shall provide guidance on implementation of this Decree.
2. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities are responsible for implementation of this Decree.
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