Regulation on Government Bond Futures Contract

I. Government bond futures contract

1. Government bond futures contract

Government bonds or some countries called futures contract products on the interest of buy agreement or selling underlying assets which are government bonds on predetermined prices at a specific in the future. The two parties are obliged to perform that contract at maturity.

2. The form of 5 years Government bond futures Contract transactions

No.	Conditions	Description
1	Contract name	5 years government bond futures contracts
2	Contract code	According to regulations on trading code of HNX
3	Underlying asset	5-year Government Bond, par value: VND 100,000, coupon: 5%/year, interest payment at the end of every 12-month, principal payment one times at maturity date
4	Contract size	VND 1 billion
5	Multiplier	10.000
6	Initial Margin Ratio (IM)	In accordance with PHS policy and in accordance with VSD regulations
7	Discount Margin (DM)	In accordance with PHS policy and in accordance with VSD regulations
8	Reference price	Daily settlement price of the previous trading day or theoretical price (in the first trading day)
9	Trading collar	+/- 3% compared with the reference price
10	Trading unit	01 contract
11	Tick size/Quotation Unit	VND 01
12	Order limit	Maximum 500 contracts/order
13	Final trading day	The fifteenth day of the expiry month. In case it is a holiday, it will be the previous trading day.
14	Final settlement day	The 3rd trading day from the final trading day
15	Settlement price at final trading day	Settlement price at end of day of the contract is determined at the final trading day
16	Settlement method	Physical settlement
17	Criteria of deliverable bonds	Government Bonds issued by Vietnam State Treasury, with remaining maturity from three to seven years on final settlement day, a minimum of VND 2,000 billion listing value. The conversion factor is calculated on the basis of coupon 5% per year* *Vietnam State Treasury
18	Daily settlement price method	Regulated by VSD
19	Final settlement price method	Daily settlement price of final trading day
20	Maturity month	Last 3 months of 3 quarters nearest. For example: the current month is April. The due months are June, September, and December

3. The form of 10 years Government bond futures Contract transactions

No.	Conditions	Description
1	Contract name	10 years government bond futures contracts
2	Contract code	According to regulations on trading code of HNX
3	Underlying asset	10-year Government Bond, par value: VND 100,000, coupon: 5%/year, interest payment at the end of every 12-month, principal payment onetimes at maturity date
4	Contract size	VND 1 billion
5	Multiplier	10.000
6	Initial Margin Ratio (IM)	In accordance with PHS policy and in accordance with VSD regulations
7	Discount Margin (DM)	In accordance with PHS policy and in accordance with VSD regulations
8	Reference price	Daily settlement price of the previous trading day or theoretical price (in the first trading day)
9	Trading collar	+/- 3% compared with the reference price
10	Trading unit	01 contract
11	Tick size/Quotation Unit	VND 01
12	Order limit	Maximum 500 contracts/order
13	Final trading day	The twenty-fifth day of the expiry month. In case it is a holiday, it will be the previous trading day.
14	Final settlement day	The 3rd trading day from the final trading day
15	Settlement price at final trading day	Settlement price at end of day of the contract is determined at the final trading day
16	Settlement method	Physical settlement
17	Criteria of deliverable bonds	Government Bonds issued by Vietnam State Treasury interest payment at the end of every 12-month, have equal interest payments, one-time principal payment at maturity, remaining maturity from eight to eleven years on final settlement day, a minimum of VND 2,000 billion listing value. Conversion factor is calculated on the basis of coupon 5% per year* *Vietnam State Treasury
18	Daily settlement price method	Regulated by VSD
19	Final settlement price method	Daily settlement price of final trading day
20	Maturity month	Last 3 months of 3 quarters nearest. For example: the current month is April. The due months are June, September, and December

4. Trading time

Time	Trading session	Order type
8:45 – 9:00	Opening session	ATO, LO Can not cancel order
9:00 – 11:30	Continuous order matching on morning session	LO, MOK, MAK, MTL Can cancel order
11:30 – 13:00	Break between sessions
13:00 – 14:45	Continuous order matching on afternoon session	LO, MTL, MOK, MAK Can cancel order
8:45 – 11:30 & 13:00 – 14:45	Put-through trading	Put-through order

Note: Not executing ATC periodic order matching session

5. Types of orders

ATO order: is order to buy/sell derivative securities at the opening price. Order without specific price, write ATO. Orders priority first compared LO orders during order matching and automatically cancel when periodic session finish.
LO order (Limit order): Order to buy/sell derivative securities at a specified price or better. Orders have specific price and are valid until the end of the trading day or until canceled.
Market order: buy order at the lowest selling price or sell order at the highest price available in the market. Orders used in continuous matching orders and will be canceled on the trading system immediately after entry if there is no reciprocal order..
Market to limit (MTL): the order is entered, if it does not match, the remaining will be converted into a limit order.
Market order match or kill (MOK): if the order is not fully executed, it will be canceled on the trading system immediately after it is entered.
Market order and kill (MAK): The order may be executed in all or a part. The remaining of the order will be canceled immediately after matching.

6. Trading method

- Matching trading:

Periodic order matching method: is used to determine the opening and closing prices in the trading session by the method of matching buy and sell orders of derivative securities at the end of the opening session
Continuous order matching method: is the method of matching buy and sell orders intermediate when order is entered into the trading system based on the principle of determining the executed price which is the price of reciprocal limit orders waiting on the order book.

- Put-through trading: A method whereby the buyer and the seller negotiate with each other on trading conditions. After that, the transaction will be entered into the trading system by member securities companies of sellers and buyers to record the results.

7. Rules of matching order

- Price priority:

Buy order (Long) with higher prices are executed first.
Sell order (Short) with lowest price are executed first.

- Time priority: In case the buy or sell orders have the same price, the order entered into the trading system first shall be executed first

- If the reciprocal orders are satisfy in price, the matched price will be the price of the order entered into the system first

8. Cancel/Amend trading order

- Cancel/Amend trading orders only valid for the orders that have not been executed or the remaining of the orders have not been executed yet.

- Limit order are allowed to adjust prices, volumes and cancel orders during the trading time. The order of priority for order after fixing is determined as follows:

Order of priority for order does not change if only adjust decrease volumes
Order of priority for order is calculated since the correction order is entered into the trading system for cases of increasing volume and/or fixing price.

- Amendment and cancellation are not allowed in the matching periodic session.

9. Settlement contract performance

The settlement method for GB 05 years is physical delivery with final settlement date is the third working day (03) from the last trading day. Seller selects and decides to transfer bond in a delivery bond basket to payment obligation to the buyer. In return, the buyer pays the money when he receives the bond at the final settlement date
Ha Noi Stock Exchange finalized the list of bonds enough transfer condition for contract codes with the nearest maturity 30 days before the final trading date. If this day is holiday, the finalizing list date is previous trading day. The list of bonds enough transfer condition will be updated to the finalizing date
Determine settlement obligation GB by cash of buyer

Settlement obligation GB by cash = FSP x CF x M + AI

- In which:

M: Multiplier
FSP: Final settlement price
AI: Bond interest beneficiary unpaid calculated from the previous interest payment period until the last payment date (provide by Ha Noi Stock Exchange)
CF: Conversion ratio (provide by HNX).

- At final trading day (E)

The buyer proves their ability to pay the money (Bank guarantee, blocking confirmation of bank)
The seller proves their ability to pay the Government bond

- At E+2 day: Seller confirms volume and type of government bond to delivery, VSD check to allocate and determine cash payment obligation of buyer

- At E+3 day: