Foreign investors are about to be allowed to trade 100% without deposit?

The State Securities Commission (SSC) has just announced that it is seeking feedback from units, organizations, and individuals on the draft Circular amending and supplementing a number of articles of the Circulars regulating securities trading on the securities trading system; clearing and settlement of securities transactions; operations of securities companies; and information disclosure on the securities market.

According to current regulations, foreign investors must deposit 100% of transactions. This is considered a bottleneck that needs to be removed in the process of upgrading the market. Therefore, the draft Circular has some notable contents related to foreign investors' deposit transactions.

First , amend and supplement point a, clause 1, Article 7. Specifically, it states: “Investors may only place buy orders for securities when they have sufficient funds in their securities trading account, except for the following transactions: Margin trading as stipulated in Article 9 of this Circular; Non-margin trading with 100% funds from foreign institutional investors as stipulated in Article 9a of this Circular; Transactions by investors opening securities custody accounts at custodian banks when there is a payment guarantee or confirmation from the custodian bank accepting the investor's request for payment of securities transactions.”

Secondly , add Article 9a, "Non-margin transactions with 100% foreign institutional investor funds," after Article 9 of Circular No. 120 dated December 31, 2020, regulating transactions of listed and registered shares, fund certificates, corporate bonds, and secured warrants listed on the stock exchange system. Accordingly, securities companies will be allowed to accept buy orders from foreign institutional investors even when the client's account does not have 100% of the order value.

Finance - Banking - Will foreign investors soon be allowed to trade with 100% margin? — Clearing and settlement of securities transactions are carried out in accordance with the law and the regulations of VSDC.

Third, add Article 35a "Payment for securities purchase transactions without 100% deposit of money of foreign institutional investors" after Article 35 of Circular No. 119 dated December 31, 2020 of the Minister of Finance regulating registration, depository, clearing and payment of securities transactions.

Specifically, foreign institutional investors must have sufficient funds in their accounts to settle their transactions before the depository member confirms the results of the securities transaction with the Vietnam Securities Depository and Clearing Corporation (VSDC). Clearing and settlement of securities transactions are carried out in accordance with the law and VSDC regulations.

In case a foreign institutional investor does not have enough money within the prescribed time limit, the investor's payment obligation for the securities purchase transaction lacking money will be transferred to the payment obligation of the securities company where the investor placed the order for compensation.

Securities companies where foreign institutional investors place securities purchase orders are obligated to pay for securities purchases made by foreign institutional investors that are short of funds, as stipulated by regulations. Securities companies must ensure they have sufficient capital to make payments. In case of insolvency, they will be subject to penalties in accordance with the law and the VSDC Regulations.

Fourth , add clause 9 in Article 16 "Securities companies providing 100% non-margin trading services for foreign institutional investors are obliged to pay for transactions that lack money from customers".

According to the objectives set out in Decision No. 1726 dated December 29, 2023, of the Prime Minister approving the Strategy for the Development of the Stock Market until 2030, the goal is to upgrade the Vietnamese stock market from a frontier market to an emerging market by 2025, according to the stock market classification standards of international organizations .

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