Vietnam’s First Derivatives Market And CCP Goes Live
GMEX Technologies, a wholly owned subsidiary of GMEX Group, is pleased to announce the go-live of the first Derivatives market and fully integrated central counterparty clearing house in Vietnam. GMEX Technologies has delivered a state of the art multi-asset, multi-language exchange trading system and market surveillance solution with a real-time clearing and settlement system. The project, which also provided GMEX Group’s global business and operational expertise, was delivered in collaboration with FPT Information System based in Hanoi, who provided local implementation support and project management.
The launch announcement was made at an event in Hanoi in the presence of Prime Minister Nguyen Xuan Phuc, members of his cabinet and authorities from related agents including Minister of Finance, Governor of State Bank of Vietnam, Major of Hanoi city People Committee, Chairman of State Securities Commission. The Ministry of Finance has entrusted Hanoi Stock Exchange and Vietnam Securities Depository to operate the derivative market’s transaction and settlement activities.
The new derivatives market will make it attractive for institutional investors to enter the Vietnamese market by providing hedging facilities for risk management; the ability to leverage, extend their investment period and keep market volatility low. It will also help investors predict the future movement of securities and turn profits on their invested assets. This aligns with the government’s objectives to encourage foreign investment, create a capital markets environment to support this and ultimately move Vietnam from MSCI frontier market status to MSCI emerging markets status.
With a market membership that includes settlement banks, intermediaries and investors from both enterprises and investment funds, the first traded instruments will be the VN30-index™, which tracks the performance of the 30 largest companies by market capitalization and liquidity basis on the Ho Chi Minh City Stock Exchange. This will be then followed by Government bond futures. Seven securities companies — HCM City Securities, Saigon Securities, VietCapital Securities, BIDV Securities, VNDIRECT, MBS (Military Bank Securities) and VPBank Securities — have currently been approved as authorized traders on the market. International trading and brokerage firms including those from Japan and South Korea have shown an interest in the market’s products.
The derivatives market and CCP have been set up to the highest international standards aligned with the CPMI-IOSCO Principles for Market Infrastructures A strict, comprehensive legal framework has been developed for the market operation by drawing lessons from the international financial crises.
Hirander Misra, Chairman & CEO of GMEX Group, commented, “We are delighted to be in Hanoi at the launch of the first Derivatives exchange and clearing house and excited to be supporting the development of the capital markets in Vietnam.” He added, “This initiative highlights our continued focus on delivering innovative new products and emerging market solutions as well as growth through a unique sustainable partnership-driven model.”
VSD commented that the derivatives clearing and settlement system, developed in collaboration with FPT and solution provider GMEX Group, is a modern system built in line with current international practices. The solution also complies with Vietnam’s specific legal framework, namely the management of position limits, surveillance and calculation of margin deposits up to the level of individual investor. In combination with synthesized functions of effective risk management, the system will serve as a fundamental base for a safe and sound operation of Vietnam’s derivatives market.
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.