Agnes Thao
Oct 20, 2023
Research Papers / Writing a small research about the challenges of Derivative market in Vietnam [2]
Firstly, although the legal basis for the derivatives market has been built based on the conditions of Vietnam's financial market, ensuring the safety and security of derivatives market operations. effective. However, securities companies' ability to fully comply with legal regulations still needs to be improved. Specifically, according to Decree 158/2020/ND-CP on derivatives trading, securities companies must meet certain financial conditions such as self-trading of derivatives, and have charter capital and equity. Owning 600 billion VND or more, or operating derivative securities brokerage activities, requires charter capital and equity of 800 billion VND or more. In addition to minimum capital regulations, securities companies must meet other conditions on financial safety indicators, business profits, etc. With the general scale of current securities companies, further expansion of the derivatives market is difficult and a challenge for authorities and lawmakers. According to ssc.gov.vn, The law on the formation of the derivatives market in Vietnam was formed quite early, prepared in 2015. However, by 2023, the law on the derivatives market has hardly been met by any business, so The derivatives market is quite small in Vietnam even though it was established 6 years ago
Secondly, the State Securities Commission and securities companies have prepared human resources in advance as well as have a thorough training process on derivative financial market transactions as soon as there is an operating roadmap. and officially put this market into operation, but confusion is inevitable. On the other hand, there is not much practical experience in trading in this market, requiring a deep level of expertise as well as a certain understanding of the market. This leads to difficulties for staff in professionally participating in brokerage, self-trading, and customer consulting to affirm their superior position in risk prevention of derivatives, contributing to actively contribute to stabilizing the basic market.
Thirdly, with the consequences of the epidemic and the stagnation of the Vietnamese economy after a long period of applying social distancing measures and restricting activities in epidemic-affected localities, the market Vietnamese stocks have had periods of decline due to general effects, and the derivatives market is no exception. However, the basic role of derivative financial instruments is to hedge risks when the underlying market fluctuates, but this role has not been demonstrated strongly and safely in the case of Vietnam. This also partly shows the fear of investors in general as well as the in-depth understanding of this tool is still quite limited, especially for individual investors in the market.
Finally, derivative products differ from the underlying market in that the underlying assets are mainly traded in the market on which they are listed, while derivatives can be issued by many exchanges. different regardless of whether the underlying asset is traded on the same market. Specifically, currently on the Singapore stock market (SGX), there is a derivative product about self-interested activities, the VN30 index with the code name FTSE Vietnam 30 Index, which has been released by this department since 2019 and is still traded on the market. this market. This is truly a big challenge for the future development of Vietnam's derivatives market when having to compete for the same product with markets that are more developed in scale and depth.
Derivative market challenges
Firstly, although the legal basis for the derivatives market has been built based on the conditions of Vietnam's financial market, ensuring the safety and security of derivatives market operations. effective. However, securities companies' ability to fully comply with legal regulations still needs to be improved. Specifically, according to Decree 158/2020/ND-CP on derivatives trading, securities companies must meet certain financial conditions such as self-trading of derivatives, and have charter capital and equity. Owning 600 billion VND or more, or operating derivative securities brokerage activities, requires charter capital and equity of 800 billion VND or more. In addition to minimum capital regulations, securities companies must meet other conditions on financial safety indicators, business profits, etc. With the general scale of current securities companies, further expansion of the derivatives market is difficult and a challenge for authorities and lawmakers. According to ssc.gov.vn, The law on the formation of the derivatives market in Vietnam was formed quite early, prepared in 2015. However, by 2023, the law on the derivatives market has hardly been met by any business, so The derivatives market is quite small in Vietnam even though it was established 6 years ago
Secondly, the State Securities Commission and securities companies have prepared human resources in advance as well as have a thorough training process on derivative financial market transactions as soon as there is an operating roadmap. and officially put this market into operation, but confusion is inevitable. On the other hand, there is not much practical experience in trading in this market, requiring a deep level of expertise as well as a certain understanding of the market. This leads to difficulties for staff in professionally participating in brokerage, self-trading, and customer consulting to affirm their superior position in risk prevention of derivatives, contributing to actively contribute to stabilizing the basic market.
Thirdly, with the consequences of the epidemic and the stagnation of the Vietnamese economy after a long period of applying social distancing measures and restricting activities in epidemic-affected localities, the market Vietnamese stocks have had periods of decline due to general effects, and the derivatives market is no exception. However, the basic role of derivative financial instruments is to hedge risks when the underlying market fluctuates, but this role has not been demonstrated strongly and safely in the case of Vietnam. This also partly shows the fear of investors in general as well as the in-depth understanding of this tool is still quite limited, especially for individual investors in the market.
Finally, derivative products differ from the underlying market in that the underlying assets are mainly traded in the market on which they are listed, while derivatives can be issued by many exchanges. different regardless of whether the underlying asset is traded on the same market. Specifically, currently on the Singapore stock market (SGX), there is a derivative product about self-interested activities, the VN30 index with the code name FTSE Vietnam 30 Index, which has been released by this department since 2019 and is still traded on the market. this market. This is truly a big challenge for the future development of Vietnam's derivatives market when having to compete for the same product with markets that are more developed in scale and depth.
