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How is the derivatives market monitored?

14:46 | 05/10/2017

VCN- Derivative stock market monitoring is conducted as in the market to detect and prevent abnormal trading behavior that affects the real value of derivative securities.

how is the derivatives market monitored
The Hanoi Stock Exchange is responsible for setting up a monitoring and monitoring system for stock market supervision. Source: Internet.

Basically, the monitoring activity on the derivatives market is carried out continuously through the day's alerts and analytical reviews on the basis of multi-day trading data. The purpose of monitoring is not only to detect infringements but also early warning signs of possible violations to protect the interests of market investors and sustainable development of this market.

Major participants in the derivatives market include derivatives trading members, clearing members, payment banks and investors (organizations and individuals). Currently, the Ministry of Finance is drafting the Circular replacing the Circular No.13/2013/TT-BTC dated January 25th, 2013 on supervision of securities transactions on the stock market. On August 2nd, 2017, the Ministry of Finance issued Decision No.1520/QD-BTC regulating the monitoring of trading activities on the stock market. Accordingly, three units responsible for supervision on the stock market are the State Securities Commission (SSC), Hanoi Stock Exchange (HSC) and Vietnam Securities Depository (VSD).

The SSC is responsible for developing a complete legal framework for the management and supervision of the derivative market so that the transaction is open, transparent and fair, ensuring the development of the stock market. To be born sustainably and to protect the interests of investors in the market. The SSC issues legal documents on derivative securities and licenses the operation of business organizations and service providers; Approval of listing of derivative products (contract approval).

The Hanoi Stock Exchange, as the market operator, is responsible for setting up a monitoring system and organizing market surveillance, building a derivative trading system, develop a contract form and be responsible for organizing market operations, managing trading activities and monitoring derivatives trading activities. Supervision activities at the SEG have now developed inter-market monitoring to ensure that the impact of the underlying market and the derivative market is smooth and trading activities show signs of usual between two markets are strictly controlled.

Vietnam Securities Depository plays the role of clearing center under the Central Clearing Counterparty (CCP) mechanism in the Vietnam's stock exchange. The CCP mechanism allows the process of clearing and settlement of derivative securities to take place smoothly, safely and fairly for all parties involved. VSD builds control stations for clearing and settlement of derivative securities transactions through strict regulations on management and supervision of maintaining margin levels; Determine and adjust the status limit for the clearing member, the investor as prescribed.

Payment on derivatives market is made through a payment bank named VietinBank. The paying bank is obliged to carry out the accounting and remittance of derivatives trading accounts according to the results of daily and the last settlement payment day received from the VSD. On the system, Vietinbank and VSD are linked together to ensure the monitoring of the actual account value of customers achieve optimal efficiency.

VSD shall supervise custody members and clearing members in the compliance with the law on securities and stock market in the implementation of professional activities related to VSD; To monitor the rate of use of collateral according to each account of the investor or member of the clearinghouse; Monitor the position limits of investors when participating in derivatives trading.

In case of detecting abnormal signs in the payment of transactions or signs of investors or members of clearing and settlement insolvency, VSD warns and requests the members to explain and provide documents and information. Relevant and timely report to the State Securities Commission and at the same time notify the Stock Exchange. At the same time, to promptly notify the SEs of violations of the use of collateral, violating position limits.

The VSD also coordinates with the SSC to conduct periodical or extraordinary inspections of the subjects under its management; To handle violations according to their competence and report them to the SSC for handling according to law provisions in cases where they fall beyond their competence; To compile and send to the SSC periodic and irregular monitoring reports, upon request and reports in service of the supervision etc.

Investors are only allowed to participate in futures trading and settlement through trading members and clearing members of the stock market in Vietnam.

By H.Vân/ Huu Tuc