August 18, 2019 16:58

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Reviewing two years of the derivatives market

19:57 | 12/08/2019

VCN - On August 10, 2019, the derivatives market marked its second anniversary. It has promoted its role, attracted investors and made a significant contribution to the development of Vietnam’s securities market.

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reviewing 2 years of operation of the derivatives market
On August 10, 2019, the derivatives market celebrated two years of operation.

Good growth

After two years of operation, the derivatives market has developed remarkably. It has presented its role as a tool for risk prevention, contributing to maintaining capital flow in the base market and attracting domestic and foreign investors.

The derivatives market has seen good and stable growth. Transactions increased sharply when the base market experienced strong fluctuations.

According to HNX, over the past two years, there were more than 36 million transaction contracts. In the first seven months of 2019, the trading volume of future contracts at share index of VN30/session on average was nearly 100,000 contracts/session, 1.27 times higher than 2018 and 10 times higher than 2017. Compared to the SET50 index in Thailand derivatives market, the trading volume was equivalent to 70% compared to the average trading volume of future contracts in the SET50 index.

Derivatives has presented its role in effectively preventing risk and stabilizing investor sentiment, especially when the base market fluctuates strongly, and is a efficient solution to keep investors and avoid divestment when the base market falls.

The volume of open contracts increased 2.7 times from 8,077 contracts at the end of 2017 to 20,494 contracts on July 31, 2019. In the declining period of the base market in May and June, 2018, and May and June, 2019, the trading volume on the derivatives market strongly decreased compared to the previous month, especially open contract, the whole market had a sudden increase compared to the previous months. For example, in the trading session on May 23, 2019, the open interests (OI) saw a record level since its launch, reaching 39,854 contracts (1.85 times higher than the end of 2018 and nearly 5 times higher than the end 2017).

Attractive products

According to the roadmap of product development from low to high level, on July 4, Hanoi Stock Exchange officially launched the Government bond futures contract to provide one more investment option and effective risk prevention tools for investors in the bond market, especially institutional investors.

So far, the derivative market has seven product codes of futures contracts in accordance with international practice, in which four product codes of VN30 index futures contracts including contract codes with maturity date as current month, next month and the last 2 months of the next 2 quarters and 3 futures contracts of Government bonds with a 5-year term with maturity as the last 3 months of the latest 3 quarters. After more than a month, the Government bond futures contract has also been interested by investors and more than 100 contracts were traded, the OI volume at the end of July 2019 was 55 contracts.

The strong growth of the derivative stock market, especially the VN30 index futures contract has attracted attention from foreign organizations. Especially, investment funds simulating the VN30 index have attracted many foreign capital flows.

According to Hanoi Stock Exchange, recently, the Singapore Stock Exchange has expressed a desire to cooperate in developing derivative products on Vietnamese stocks listed on the Singapore Stock Exchange to serve the investment and risk protection needs of foreign investors.

The volume of derivative trading accounts continues to increase every month. By the end of July 2019, there were 78,445 derivative trading accounts opened, almost doubling the same period last year. The trading and clearing system of the derivative stock market has so far had 14 securities companies.

Notably, transactions of domestic individual investors still accounted for a large proportion despite gradual decrease, accounting for 91.15% of the total trading volume (compared to 99.1% at the end of 2018). Transactions of domestic institutional investors (including self-trading) still accounted for a very small portion of 1.54% of domestic investors' transactions. Transactions of foreign investors increased but still accounted for a very small proportion of 0.58% of the total trading volume of the whole market. For products like five-year Government bond futures contracts, transactions were carried out by institutional investors who were banks. The self-trading transactions of securities companies accounted for only 10% of the trading volume.

Launching new products

In 2019, the Hanoi Stock Exchange continued to study the development of VNX 200 index futures contracts and is going to research new derivative products such as stock index option contracts, single-stock futures (SSF), and single stock option (SSO).

At the same time, the Hanoi Stock Exchange will work with relevant agencies to develop a legal framework for new products to prepare for the launch of new products to be applied after 2020 to diversify and meet investors' demands and follow the Government's guidelines and orientations.

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VCN- While the base securities market is gloomy, the derivatives market continues to grow and attract investors.

In addition to the development of new derivative products, the Stock Exchange will also strengthen coordination with market regulators and relevant market operators to continuously improve supervisory activities and maintain an effective, smooth trading system and connect with market members and investors to promptly meet the needs arising in the market.


By Thuy Linh/ Huyen Trang