In the first month of applying Non-prefunding, more than 300 foreign institutional accounts registered

In the first month of implementing the new mechanism, foreign investors registering for margin trading (NPF) were very active, accounting for 11% of the total value of securities purchases at these securities companies.

In the first month of implementing the non-prefunding program, more than 300 foreign institutional accounts registered.

In the first month of implementing the new mechanism, foreign investors registering for margin trading (NPF) were very active, accounting for 11% of the total value of securities purchases at these securities companies.

Ms. Ta Thanh Binh - General Director of Vietnam Securities Depository and Clearing Corporation

Nearly 330 foreign organizations registered to trade NPF in the first month.  

Speaking at the seminar "Overview of the Capital Market in 2024 and Prospects for 2025" with the theme: "Sustainable Development of Vietnam's Capital Market - Current Situation and Solutions" organized by the Vietnam Financial Consulting Association in collaboration with VietnamFinance Investment Magazine on the morning of December 6th, Ms. Ta Thanh Binh - General Director of Vietnam Securities Depository and Clearing Corporation (VSDC) updated on the trading and settlement situation of non-prefunding (NPF) transactions at these units (if any) after nearly a month of implementing Circular 68, with one of the most important contents being the removal of the mandatory margin requirement (non-prefunding) for foreign institutional investors.

Specifically, according to information VSDC received from 4 securities companies and 5 custodian banks, as of November 29, 2024, a total of over 300 foreign institutional investor accounts had registered to trade NPF, accounting for an average of 11% of the total value of securities purchases (stocks, fund certificates, warrants) at these securities companies. According to Ms. Binh, VSDC and related parties have performed quite well, preventing cases of foreign institutions lacking funds leading to the transfer of payment obligations or affecting market settlement operations. The provision of services, risk management of NPF transactions by securities companies and custodian banks, as well as the use of the NPF trading mechanism by foreign institutions, have been fundamentally carried out cautiously and safely. “Investors are also very cautious, completing fund transfers on T+1 day, even on the afternoon of the trading day,” the VSDC representative also stated.

FTSE Russell could make a significant move in September 2025.

According to Ms. Binh, in a recent meeting with representatives from FTSE Russell, the market rating agency confirmed that Vietnam has met 7 out of 9 upgrade criteria. The remaining two criteria are removing the mandatory prefunding requirement for foreign investors and handling failed trades.

Regarding the non-prefunding solution, FTSE representatives see that Vietnam has taken practical steps in institutional policy and implementation. They will wait for the market to operate for a while longer before evaluating it at the March review and may take concrete action in September 2025. "This is also a major desire and goal of the regulatory body and market members," Ms. Binh also emphasized.

With the final criterion for upgrading being failed trade management, according to Ms. Ta Thanh Binh, the solution is to apply a Central Clearing and Settlement (CPP) mechanism. Regarding this issue, new regulations in the Securities Law, as amended in 7 laws in the finance and budget sector, have laid an important foundation for implementing CCP, allowing VSDC to establish a subsidiary to separate risks.

Besides FTSE, Vietnam is also pursuing the goal of upgrading its market status to MSCI standards. Regarding MSCI Global's criteria, as of June 2024, the Vietnamese stock market had met 10 out of 18 criteria, but some criteria still need improvement, such as the foreign ownership limit, the remaining foreign ownership limit, and the degree of liberalization of the foreign exchange market.

According to the General Director of VSDC, in the third and fourth quarters of 2024, the agency actively participated in providing feedback and proposing amendments to the Securities Law and Decree 155 to prepare for the establishment of a subsidiary company to perform the function of a central counterparty clearing (CCP) for the underlying securities market. This is a necessary step for managing overall market settlement risks and continuing towards the criteria for upgrading the Vietnamese stock market in the future. In addition, the regulation on disclosing information in English and its synchronized application according to the roadmap will gradually improve transparency criteria. VSDC and the stock exchanges will also apply this regulation from 2025. The volume of work to be implemented from the beginning of next year to meet the criteria will not be simple.

“Many organizations have presented figures outlining expectations for foreign capital inflows into the Vietnamese stock market. We believe the upgrade will create a positive effect. Along with institutional reforms and changes in administrative procedures, this will also create positive momentum,” Ms. Binh stated, while also emphasizing that foreign capital typically flows in before the upgrade decision is announced.

However, alongside the advantages, this also raises concerns about the pressure on the system due to the large volume and value of transactions and the faster frequency of transactions. If upgraded to emerging market status, the Vietnamese stock market is expected to receive a large influx of investment capital into emerging markets. This capital inflow could bring a large volume of transactions with a higher frequency and consistency, potentially putting significant pressure on the trading and clearing/settlement systems. Furthermore, there are issues related to whether the foreign exchange conversion system can adequately handle such a large volume of transactions.

The pressure to maintain the upgraded ranking after meeting the new ranking criteria will also be a challenge for stakeholders. “According to discussions with FTSE Russell, the ranking criteria can be changed as needed, depending on the demands of major clients. Therefore, achieving, being ranked, and then maintaining the ranking will depend heavily on the annual assessments of international organizations. If the conditions change rapidly and frequently, we need to be prepared to propose changes to the legal regulations to make them more appropriate, and to promptly revise and supplement the system as needed,” the VSDC General Director affirmed.

“These are the real challenges we need to face and develop solutions for. From the perspective of the regulatory body, we will create a solid foundation to facilitate the goal of upgrading the stock market. Upgrading is just a matter of time; it will certainly be achieved,” Ms. Ta Thi Thanh Binh emphasized.

Source: https://baodautu.vn/thang-dau-ap-dung-non-prefunding-hon-300-tai-khoan-to-chuc-nuoc-ngoai-dang-ky-d231826.html