Trading guidelines for derivatives market in Vietnam

Open trading account

To conduct derivatives trading, an investor has to open a derivatives trading account at a trading member of derivatives market. In the case that the investor had a securities trading account, he/she only needs to open a sub-account of an existing account to trade on derivatives market.

Trading sessions and trading time

Unlike the stock market which has only 2 trading sessions (continuous order-matching session and closing periodical order-matching session, the futures market has 3 trading sessions: opening periodical order-matching session, continuous order-matching session and closing periodical order-matching session. The derivatives market opens 15 minutes sooner than the stock market but closes at the same time as the stock market, as follows:

– Morning session:

+ Opening periodical order-matching session: 8h45 – 9h00

+ Continuous order-matching session: 9h00 – 11h30

Put-through session: 8h45 – 11h30

– Break 11h30 – 13h00

– Afternoon session:

+ Continuous order-matching session: 13h00 – 14h30

+ Closing periodical order-matching session: 14h30 – 14h45

Put-through session: 13h00 – 14h45

VN30-Index Futures

No.ContentsDescriptions
1Contract nameVN30 index future
2Contract code According to regulations on trading code of HNX, for example: VN30F1706
3Underlying AssetVN30 index
4Contract sizeVND 100,000 × VN30 Index point
5MultiplierVND 100,000
6Expiry monthCurrent month, next month, 2 end months of the next 2 quarters.
7Trading collar7%
8Tick size0.1 index point

The first product introduced for derivatives market is VN30-Index futures.

Like the stock, each futures contract has a unique code which is determined under a certain convention and contains information about that contract. For example, the contract code VN30F1706 includes information: “VN30F” is the futures contract of the VN30. “17” is 2017 and “06” is the expiry month of the contract.

At the present, there will be four “contract months” traded with the VN30 Index: future contracts for the current month, futures contracts for the next month, futures contracts at the end of the latest quarter, futures contracts at the end of the next quarter.

For example, the futures contract with code VN30F1706 is the contract for the current month which will expire in June 2017. Besides, investors can trade contract with code VN30F1707 which will expire in the next month (July, 2017). Contract number VN30F1709 is the contract that will expire in the latest quarter (September 2017 – third quarter 2017). Contract number VN30F1712 is the contract expiring in the next quarter (December 2017 – fourth quarter 2017).

The most important part of the futures contract is multiplier. Multiplier is used to convert the index point value into money and will determine the contract size. The multiplier for VN30-Index is 100,000 VND, meaning the size of a futures contract of the VN30-Index at 700 points is 70,000,000 VND (100,000×700).

Margin

Based on the contract size, the investor can calculate the initial margin to buy a futures contract. Under the rule of the VSD, the initial margin is 10% of the contract value, meaning that if the contract size is 70 million, the investor has to spend the initial margin is 7 million to buy 1 contract.

Tick size

Tick size is not determined in money, it is calculated based on the underlying index point of the contract and is specified according to each specific contract form. For the stock index futures contract, tịck size is 0.1 index point.

The tick size of the VN30 Index is 0.1 index point, which is similar to the tick size of stock. For example, the VN30-Index is standing at 700 points, the investor can place orders at the following points: 700.1 points, 700.2 points, 699.9 points and then he/she need a corresponding amount of money to buy one contract at that tick size.

Trading unit  is 01 contract

Trading collar

Unlike the listed stock market and UPCoM, the futures market has a trading collar which is determined for each specific contract within the range of the ceiling price and the floor price. Order limit, position limit are stipulated under each contract, contract form and announced by Hanoi Stock Exchange before application. For VN30-index futures, the trading collar is 7%.

Trading orders

Types of orders for trading futures contracts are similar to the stock, including limit order (LO), market price order (MOK, MAK, MTL), ATO, ATC. The correction and cancellation of orders is the same as for listed stock.

Reference price

There is not daily closing price in trading of futures, instead, we have daily settlement price. Daily settlement price is closing value of underlying index in the final trading day of futures contract which is determined and announced by the VSD. Reference price is daily settlement price of the previous trading day. The reference price in the first trading day is determined by the VSD.

Final trading day

The final trading day is the third Thursday of the expiry month. In case it is a holiday, it will be the previous trading day

Trading and settlement method

Trading method includes: matching and negotiation based on the principle of price and time priority.

Settlement method: by cash

In trading stocks, the investor pays money and stocks to the seller through the clearing system with the value equivalent to the value of the matched stocks. In trading futures, if the investor predicts that the VN30-Index will increase/decrease in the near future, the investor will place an order to buy a futures contract.

When that index increases/decreases as expected, the investor can sell the contract to make profit. In essence, an investor places an offer to sell a futures contract with the same contract term as a holding contract, that is, the investor is balancing his position with the current contract and the total position, in this case, is equal to zero. The profit will be collected in cash. If the investor does not hold the contract to balance the position, the sale of the new contract is actually to buy a contract. The investors will have to pay money (initial margin) to get a contract.

In order to make profit/cut loss from an existing position, the transaction is to cover/close the position by an action counter to the previous transaction in a contract with the same term.

On 24/3/2017, the Hanoi Stock Exchange (HNX) issued the Rule on listing and trading futures contracts at HNX, with the main contents as follows:

Listing and delisting futures

The two derivatives products which will be put into transaction first are stock index futures and government bond futures.

The form of futures contract is regulated by the HNX, which includes at least the basic provisions on the contract, trading and payment method. Each futures contract has a different trading code that specifies the type of underlying asset and the maturity.

The underlying asset of a futures contract is the assumed stock and bond indices that are characterized by a government bond issued by the State Treasury. At the time of physical delivery, government bonds will be calculated by a conversion factor (the swap ratio of the underlying bond to the convertible bonds at the nominal interest rate of the assumed bond of futures on its final settlement day.)

Other than the stock issued by the corporates, the futures contract is developed and listed by the HNX.

When a futures contract expires, HNX will list new futures contract for the same underlying asset on the following trading day of the final trading day of that contract.

The contract size is determined by the stock index point or face value of the government bond multiplied by the multiplier of the contract, so the multiplier is the most important factor in the sample contract. Contract multiplier is determined by the HNX depending on each contract form.

The delisting of futures contract is conducted in the following cases: when the contract expires, when the stock index is no longer used as the underlying asset or when the HNX determines that the futures contract form is no longer suitable for market conditions.

Trading of futures

The investors conduct futures transactions in accordance with Circular No.11/2016/TT-BTC and related documents. Foreign investors conduct futures transactions in accordance with Circular No. 123/2015/TT-BTC dated 18/8/2015 of the Minister of Finance.In the case of wide-range volatility that may affect the interests of the investors, the HNX may take measures to stabilize the market and protect investors or apply the automatic suspension mechanism. The HNX shall announce measures and time of application.

Source: http://ssc.gov.vn

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