Derivatives

I. Derivative products

1. VN30 Index Futures Contract

• VN30 Index Futures Contract are the kind of futures contract with Underlying Asset - VN30 Index, simulate price expectations of VN30 Index
• 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 VN30F2007 includes information: "VN30F" is the futures contract of the VN30 index. "20" is 2020 and "07" is the expiry month of the contract.
• At the present, there will be four-month contract (contract months) traded with the VN30 Index: futures contract for the current month, futures contract for the next month, futures contract at the end of the latest quarter, futures contract at the end of the next quarter.
• For example, the futures contract with code VN30F2007 is the contract for the current month which will expire in July, 2020. Besides, investors can trade contract with code VN30F2008 which will expire in the next month (August, 2020). Contract number VN30F2009 is the contract that will expire in the latest quarter (September 2020 - third quarter 2020). Contract number VN30F2012 is the contract expiring in the next quarter (December 2020 - fourth quarter 2020).

2. The form of VN30 Index Futures Contract

3. Trading time

4. The type of orders

• ATO (ATC) orders: The buy/sell derivative securities order at opening price (closing price), which is not given a specific price, is called ATO/ATC. ATO/ATC orders having higher priority to match than limit orders and will automatically be cancelled at the end of the effective session
• LO (Limit Order): The buy/sell derivative securities order at a specific price or at a better price. It is given a specific price and validates until the end of trading day or until the order is cancelled.
• Market Order: a buying order at the lowest price or selling order at the highest price at the time. This order is used during continuous matching period and will be cancelled after being input if none counter
• Market Order – Limit (MTL): The order is input in case unmatched all, it will be transferred the remaining to LO
• Market Order – Match all or Kill (MOK): Order if not execute entirely, it will be canceled in the system at the time of input
• Market Order – Match or Kill (MAK): Order can be executed partially or entirely. The remaining will be canceled after matching.

5. Trading method

• Periodical Order Matching: The method is made on the basis of comparing buying orders and selling orders of stocks at a specific time.
• Continuous Order Matching: is the trading method made on the basis of comparing buying orders and selling orders immediately when they are input into the trading system. Principles to define matching price: is the price of counter orders waiting on order books.
• Put – through Order: is the trading method by which buyers and sellers set out mutual agreed trading conditions by themselves. After that, the transaction will be entered into the trading system by the securities company of the seller and the securities company of the buyer to record the results.

6. Matching order principles

• Price priority
• Buying orders at higher price take priority
• Selling orders at lower price take priority
• Time priority: In the case that buying orders or selling orders are at the same price, the orders entering to the transaction system first will take priority in execution.

7. Cancellation/ adjustment of order in session

• Adjustment and cancellation of orders are available for orders which have not been matched or the remaining have not been matched yet.
• LO is allowed to adjust price, quantity and cancel order in trading time. The order’s priority of order after adjustment is determined as follows:
• The order’s priority is unchanged if only decreasing quantity.
• The order’s priority is recognized since adjustment order is input into the transaction system for increasing quantity and/or adjusting price.
• It is not allowed to adjust, cancel order in periodical Order Matching session.

8. Cancellation/ adjustment of put-through

• Put-through transactions that have been matched on the trading system (with the participation and confirmation of counterparties) are not allowed to be adjusted or canceled.
• During the trading period, in case a derivatives trading member incorrectly enters the investor's put-through trading order, the derivatives trading member is allowed to adjust or cancel the put-through trading order when the order has not yet been completely confirmed by the partner.

II. Margin account regulations

1. Determining the margin value before trading ensures the initial margin and the ratio of using mortgage asset

 Initial margin (IM) = Contract multiplier x Number of contract x Final trading price x IM rate

 Included:  Contract multiplier: 100.000 VND

The final trading price is the latest matched price at the time of calculating IM if in the trading session or at the end of the day if calculating the closing IM

IM rate: Initial margin ratio is set by PHS and can change in each period

 Margin value ≥ IM * (1/ the ratio of using mortgage asset)

 2. Maintenance rate: MR = IM + VM (loss) + DM

For example: Investors participate in the derivative market

Step 1: Deposit VND 200 million to VSD via PHS successfully

Step 2: Investors predict market will increase so they decide to "buy" futures contract with code VN30F2012, expire in December, 2020.

Step 3: The minimum required initial margin value (IM) for the investor and the ratio of using mortgage to the investor's account according to regulation of VSD included:

Step 4a: Suppose that the futures contract price increases as the expectation of  investors

Similarly, at different times, VSD will check the margin account usage rate for investor accounts.

Therefore, trading account of investor is within the permitted safety threshold and investors earn 10,000,000 VND when performing the contract.

Step 4b: Suppose that the futures contract price decreases unlike the expectation of investors

VSD will check the margin account usage rate for investor accounts.

Therefore, trading account of investor is within the permitted safety threshold and investors suffered losses - 7,000,000 VND when performing the contract.

Noted that position profits will not be calculated in the maintenance margin value, the ratio of using mortgage is taking example calculated by the VSD’s regulation and the investor's profit/loss is not calculated the related fees and taxes in derivative transactions.

3. Position limit

Position limit is set to prevent an individual or organization holding a large number of contracts, maintain the stability and fairness of the market and ensure the right of investors when participating in the market

4. The warning threshold violates the ratio of using mortgage according to VSD

5. Tax policy for income from transfer futures contracts in the derivative market

Personal income tax = Partial transfer price * 0.1%, included:

Partial transfer price = (Settlement price of futures contract * Contract multiplier * Contract number * Initial margin ratio)/2

For example:

Index futures contract code VN30F2007 is made with the multiplier (100.000 VND)

Initial margin ratio of futures contract is published by VSD (13%).

• At 9:00 on July 25, 2020 investor A matched the buying order 10 futures contract code VN30F2007 with the price of 850 index point. Individual investor A must deposit personal income tax in buying trading: 850*100.000*10*13%/2*0,1%=55.250 VND
• At 10:00 on July 25, 2020 investor A matched the selling order 10 futures contract code VN30F2007, price matching of this futures contract decrease to 840 point. Individual investor A must deposit personal income tax in selling order: 840*100.000*10*13%/2*0,1%=54.600 VND

Note: The above content are just quote of some main contents of the current Trading Regulations on listing and trading futures contracts issued by the Vietnam Stock Exchange together with Decision No. 20/QĐ-HDTV dated May 20, 2022 but not all of the Trading Regulations at the Vietnam Stock Exchange. Contact us for more detailed regulations. In case the Vietnam Stock Exchange announces an adjustment/supplement to the Trading Regulations, PHS will try to update the adjusted content as quickly as possible; In case PHS does not promptly update, the adjusted /supplemented contents will take effect and replace the current contents started here.