Proposal for foreign investors to trade securities without margin

On March 20, the State Securities Commission (SSC) announced to collect opinions from units, organizations and individuals on the draft Circular amending and supplementing a number of articles of the Circulars regulating Securities Transactions (GDCK) on the GDCK system.

Accordingly, the Ministry of Finance wants to amend Article 9 of Circular 120/2020 to allow foreign institutional investors to trade without depositing 100% of the money.

To do so, foreign institutional investors must have sufficient funds in their accounts to pay for their securities purchases before the time the depository member confirms the results of the securities transaction with the Vietnam Securities Depository and Clearing Corporation (VSDC). The clearing and settlement of securities transactions shall be carried out in accordance with the law and regulations of VSDC.

Foreign investors trading stocks may not need to deposit (Illustration photo)

In case a foreign institutional investor does not have enough money within the prescribed time limit, the investor's obligation to pay for the securities purchase transaction lacking money will be transferred to the payment obligation of the securities company where the investor placed the order for compensation.

Securities companies - where foreign institutional investors place securities purchase orders - are obliged to pay for securities purchase transactions that lack funds for payment by foreign institutional investors according to regulations. Securities companies must ensure sufficient capital for payment, in case of insolvency, they will be handled for violations according to the law and VSDC's regulations.

The Ministry of Finance also stipulates that the custodian bank where a foreign institutional investor opens a securities depository account will be responsible for paying the shortfall in case of incorrect confirmation of the customer's deposit balance with the securities company, leading to a shortage of money to pay for securities transactions.

" In case it is necessary to stabilize the market, the State Securities Commission has the right to temporarily suspend 100% margin trading services of foreign institutional investors ," the draft stated.

Under current regulations, foreign investors must deposit 100% of transactions, and this is considered a bottleneck that needs to be removed in the process of upgrading the market. Recently, the Ministry of Finance has actively worked with market rating organizations such as FTSE Russell and MSCI to learn about market classification criteria and exchange information on efforts from Vietnamese management agencies.

The Ministry of Finance has also directly directed the State Securities Commission to implement many solutions to remove obstacles in considering upgrading the market.

Chau Anh

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