Articles
New concepts for improvement in securities trading

30 - 10 - 2011
By Truong Hoai Nam*

In order to improve trading conditions and enhance the effectiveness of Vietnam's stock exchanges, on 1 June 2011 the Ministry of Finance issued Circular 74/2011/TT-BTC providing guidelines on securities trading (Circular 74). With Circular 74 the Ministry of Finance introduces several new concepts to the stock exchange: margin trading, multiple trading account and intraday trading. Circular 74 takes effect on 1 August 2011.

As defined in Circular 74, margin trading occurs when a client buys securities with money borrowed from a securities company and uses the purchased securities as collateral for the loan. Inclusion of margin trading is one of the key concepts introduced by Circular 74. Any investor wishing to conduct margin trading must open a margin trading account at the same broker with which it has opened a securities trading account. An investor is only permitted to open one margin trading account at each broker.

Under previous legislation, investors were only allowed to open a single trading account. Circular 74 removes this limitation and allows investors to have multiple accounts, provided that (i) an investor opens only one account with any given securities company and (ii) the investor reports the number and code of accounts already opened in setting up a new account.

Circular 74 also allows for multiple accounts with a single securities company. The allowed accounts include:

  • Margin trading accounts;
  • Fund management companies accounts for itself and accounts for funds managed;
  • Offshore securities companies accounts for itself and accounts for its clients; and
  • Wholly foreign-owned insurance companies operating in Vietnam when trading in securities must open an account for trading the insurer's equity and an account for trading from insurance premiums. The account used for investing its own equity will be subject to caps of foreign ownership.

Circular 74 also allows for intra-day trading of a given security by a single investor provided that (i) the investor uses the same account to place both the buy and sell orders and (ii) the investor may only place additional orders for the same type of securities after the previous sell or buy order has been executed and the trading order satisfies the escrow deposit requirement. Under Circular 74 investors are not permitted to (i) conduct deals which do not result in a change in ownership of securities and (ii) simultaneously place buy and sell orders for the same type of securities in the same order or to place orders for the same type of security in the same day using different accounts.

(*) Please contact the authors at nam.truong@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.

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