A securities firm should have at least VND900 billion ($41.6 million) to become a direct clearing member and at least VND1.2 trillion ($55.5 million) to become a general clearing member. — Photo giacophieu

HA NOI (Biz Hub) — The Prime Minister last Friday issued Decree 42/2015/ND-CP on derivatives and the derivative trading market in Viet Nam, which will become valid next month.

Under the new decree, companies that trade derivatives for profits on the derivative trading market must have at least VND600 billion (US$27.8 million) in chartered capital.

Brokerage firms on the new market should have at least VND800 billion ($37 million) in chartered capital and will be allowed to trade derivatives for their own profits.

Firms should also meet the requirements set by the Ministry of Finance on profit, disposable capital, and professional procedures.

Securities firms and commercial banks may sign up to become clearing members at Vietnam Securities Depository (VSD) that will settle trading orders if they satisfy some regulations on equity, including that the equity of a direct clearing member remains less than that of a general clearing member.

In detail, a commercial bank should have equity of at least VND5 trillion ($231.5 million) to become a direct clearing firm and at least VND7 trillion ($324 million) to become a general clearing member.

A securities firm should have at least VND900 billion ($41.6 million) to become a direct clearing member and at least VND1.2 trillion ($55.5 million) to become a general clearing member.

Thus, 15-20 securities firms that meet the requirements set by the Finance Ministry will operate their businesses on the Viet Nam's derivative trading market.

In order to prepare for the promising derivative market, large securities companies have issued more shares to increase their chartered capital and support their clients in this new market.

For example, Bao Viet Securities Company (BVS) in its annual shareholder meeting decided to increase its chartered capital by VND1 trillion ($46.3 million), which should not be a problem for the company.

Nhu Dinh Hoa, Director General of BVS, said derivatives will have a bright future in Viet Nam, just like in Taiwan Stock Exchange, where derivative trading occupied 70 per cent of the total securities market.

Other large securities firms, including Vietinbank Securities Joint Stock Company, Vietcombank Securities Joint Stock Company and Sai Gon-Ha Noi Securities Joint Stock Company also plan to raise their capitals to enter the derivative market.

Derivative is a security on the securities market which is used to reduce financial risks, protect initial investments, and generate profits for investors.

On the securities market, no matter how stocks and bonds change in market values, derivatives will maintain their initial market values.

Derivatives are futures, options, and forwards that are traded on the stock exchange and listed securities that are traded on the stock exchange.

Stock exchanges, including the Ha Noi Stock Exchange and HCM City Stock Exchange, are the only legal organisations can hold derivative trading activities. — VNS