On 5 May 2015, the Government issued Decree No. 42/2015/ND-CP on derivative securities and the derivative securities market, which is considered as the very first legal framework for the derivative securities market of Vietnam to come into operation in 2016.
This Decree recognizes futures contracts, options and forward contracts of which objects are underlying assets being securities and/or other assets used as the basis for fixing the value of the derivative securities as derivative securities. There will also be other kinds of derivative securities as recognized in accordance with guidelines of the Ministry of Finance. These newly recognized derivative securities may be traded on the derivative securities market as provided by the laws.
In principle, any organization or individual may invest in derivative securities on the derivatives market, except for certain organizations, such as securities companies, fund management companies, credit institutions and State-owned companies, which must satisfy certain requirements before investing in the market.
Furthermore, for the purpose of conducting derivative securities trading and/or providing derivative securities clearance and payment services, an organization will need to obtain a certificate of satisfaction of conditions for the respective activities issued by the State Securities Commission. To obtain this certificate, in general and subject to activities registered to be conducted, the organization must satisfy a number of conditions, such as financial conditions, i.e. minimum charter capital; conditions on business results, ratios of available capital, professional rules and/or relevant requirements to be provided by the Ministry of Finance; and other conditions as provided.
What does this mean for businesses?
Through there has been a legal framework for securities trading in Vietnam since the introduction of the Law on Securities (70/2006-QH11), Decree 42/2015/ND-CP allows for more diversified securities products in the Stock Exchange, thus boosting liquidity in the securities market which will be great news for businesses that are increasingly using the Stock Market as a capital channel. Accordingly, Decree 42/2015/ND-CP is expected to support the securities market of Vietnam, increase competitiveness and help to narrow the gap between securities market of Vietnam and of other countries all over the world.
Decree 42 will take effect on 1 July 2015.
By Vietnam Law Insight.
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