Announcing new clearing and settlement regulations, removing the "pre-funding" bottleneck for foreign organizations

The regulations governing the clearing and settlement of securities transactions at the Vietnam Securities Depository and Clearing Corporation have been updated in preparation for the trading session on November 4th, when Circular 68 officially comes into effect.

New clearing and settlement regulations announced, removing the "pre-funding" bottleneck for foreign organizations.

The regulations governing the clearing and settlement of securities transactions at the Vietnam Securities Depository and Clearing Corporation have been updated in preparation for the trading session on November 4th, when Circular 68 officially comes into effect.

Foreign institutional investors can execute share purchase transactions without being required to have sufficient funds when placing orders from the trading session on November 4th.

The Board of Members of the Vietnam Securities Depository and Clearing Corporation (VSDC) recently signed Decision No. 48/QD-HDTV on the promulgation of the Regulations on Clearing and Settlement of Securities Transactions at VSDC, replacing the Regulations on Clearing and Settlement of Securities Transactions at VSDC issued with Decision No. 15/QD-HDTV dated August 10, 2023.

The newly issued regulations aim to amend and supplement the securities transaction settlement process to comply with the regulations allowing foreign institutional investors to purchase shares without requiring sufficient funds when placing orders, as stipulated in Circular No. 68/2024/TT-BTC, and to make the regulations more comprehensive and rigorous.

According to the new regulations, foreign investors who are organizations can conduct share purchase transactions without requiring sufficient funds at the time of placing an order (referred to as Foreign Investor Pre-orders) as stipulated in Article 9a of Circular No. 120/2020/TT-BTC, amended and supplemented by Circular No. 68/2024/TT-BTC.

No later than 4:30 PM on day T+1 , the depository member (DM) confirms the guaranteed/unguaranteed payment capacity for stock purchase transactions that do not require sufficient funds when placing orders by foreign institutional investors (FIAs); and confirms sufficient/unsufficient funds for securities transactions regarding the DM's payment obligations to other clients.

In the event of confirmation of insufficient funds/uncertainty to pay, no later than 5:00 PM on day T+1 , the Securities Depository Center is responsible for sending VSDC a notification regarding the lack of funds/list of non-performing accounts that cannot guarantee payment.

In the event that the prepaid investor lacks funds for payment, no later than 09:30 AM on day T+2, the securities company (for prepaid investors who have opened a custody account at a securities company) or the custodian bank (for prepaid investors who have opened a custody account at a custodian bank) shall send a written notification to VSDC requesting/rejecting payment and transfer the transaction with insufficient funds to the securities company's proprietary trading account where the prepaid investor placed the order for offsetting and settlement.

VSDC will not transfer payment obligations if the securities firm fails to send or sends a written request to transfer payment obligations/notification of refusal to pay for the underpaid transaction in an incorrect or untimely manner as stipulated in the regulations, and will be treated as if it were an underpaid purchase transaction not from the underpaid investor. Specifically, according to Circular 120/2020/TT-BTC, for transactions with delayed payment due to underpaid funds, VSDC will transfer all securities in the offsetting sale transaction to the seller's pending payment account.

Besides the revised settlement flowchart to comply with the new regulations in Circular No. 68/2024/TT-BTC, the new regulations also amend and supplement the regulations on post-transaction error correction documents. Specifically, the Order Slip is replaced by Proof of Order Placement. If the securities company does not receive the order directly, it must prepare a document detailing the customer's order information, including: Investor's name, order placement account number, securities code, buy/sell order type, quantity and price, order placement method, and order receipt time (day, hour, minute). The securities company where the investor placed the order must prepare, sign, and be responsible for the accuracy and truthfulness of the document's content.

The new regulations add a method of sending scanned documents via email (from the TVLK's registered email address with VSDC to VSDC's email address) for post-transaction error correction, error handling, payment deadline extension, payment confirmation, and payment obligation transfer. This aims to facilitate faster and more efficient coordination in handling transactions. TVLK must send the original documents to VSDC within 3 consecutive working days thereafter.

The above regulations on clearing and settlement of securities transactions take effect from November 2, 2024. Clearing and settlement activities for securities transactions established on the securities trading system before the effective date of these regulations shall be carried out according to the new regulations.

Circular 68/2024/TT-BTC, issued by the Ministry of Finance on September 18, 2024, amends and supplements several articles of circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; operations of securities companies; and information disclosure in the securities market. This circular directly addresses the bottleneck related to allowing foreign institutional investors to trade shares without requiring sufficient funds (Non-Pre-funding solution - NPS) and officially outlines a roadmap for disclosing information in English.

The changes in the Circular are considered a significant step forward in removing the "bottleneck" to meet the standards for upgrading the stock market from frontier to secondary emerging market according to FTSE Russell criteria. After 45 days of issuance, Circular 68/2024/TT-BTC came into effect on November 2nd.

Source: https://baodautu.vn/cong-bo-quy-che-bu-tru-va-thanh-toan-moi-go-nut-that-pre-funding-cho-to-chuc-ngoai-d229079.html