Foreign investors are about to be allowed to trade 100% without deposit?

The State Securities Commission (SSC) has just 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 stock exchange system; clearing and settlement of securities transactions; activities of securities companies (CTCK) and information disclosure on the stock market (TTCK).

According to current regulations, foreign investors must deposit 100% of transactions. This is considered a bottleneck that needs to be removed in the process of upgrading the market. Therefore, the draft Circular has some notable contents related to foreign investors' deposit transactions.

First is to amend and supplement Point a, Clause 1, Article 7. Specifically, “Investors are only allowed to place orders to buy securities when they have enough money in their securities trading account, except for the following transactions: Margin transactions as prescribed in Article 9 of this Circular; Transactions without 100% margin of money of foreign institutional investors as prescribed in Article 9a of this Circular; Transactions of investors opening securities depository accounts at custodian banks when there is a payment guarantee or confirmation from the custodian bank on acceptance of the investor's request for payment for securities transactions”.

Second , add Article 9a "100% margin trading of foreign institutional investors" after Article 9 of Circular No. 120 dated December 31, 2020 regulating trading of listed stocks, registration for trading and fund certificates, corporate bonds, and listed warrants on the stock exchange system. Accordingly, securities companies will be allowed to receive securities purchase orders from customers who are foreign institutional investors when the customer's account does not have 100% of the order value.

Finance - Banking - Foreign investors are about to be allowed to trade 100% without deposit? — Clearing and payment of securities transactions are carried out in accordance with the law and regulations of VSDC.

Third, add Article 35a "Payment for securities purchase transactions without 100% deposit of foreign institutional investors' money" after Article 35 of Circular No. 119 dated December 31, 2020 of the Minister of Finance regulating the registration, depository, clearing and settlement of securities transactions.

Specifically, foreign institutional investors must have enough money in their accounts to pay for their transactions before the time the depository member confirms the results of securities transactions with the Vietnam Securities Depository and Clearing Corporation (VSDC). Securities trading clearing and settlement are carried out in accordance with the law and regulations of VSDC.

In case a foreign institutional investor does not have enough money within the prescribed time limit, the investor's payment obligation 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.

The securities company where the foreign institutional investor places the securities purchase order is obliged to pay for the securities purchase transaction of the foreign institutional investor for lack of money according to regulations. The securities company must ensure sufficient capital for payment. In case of inability to pay, it will be handled according to the law and VSDC's Regulations.

Fourth , add Clause 9 to Article 16 "Securities companies providing 100% non-margin trading services for foreign institutional investors are obliged to pay for transactions that lack money from customers".

According to the objectives set out in Decision No. 1726 dated December 29, 2023 of the Prime Minister approving the Stock Market Development Strategy to 2030, striving to upgrade the Vietnamese stock market from a frontier market to an emerging market by 2025, according to the stock market classification standards of international organizations .

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