State Securities Commission strengthens solutions towards the goal of upgrading the stock market

Recently, the State Securities Commission (SSC) has proposed amending and supplementing legal documents, and actively coordinated with relevant ministries and branches to resolutely implement solutions to gradually meet the criteria of market rating organizations towards the goal of upgrading Vietnam's stock market from frontier to emerging.

Specifically, the Ministry of Finance and the State Securities Commission have organized many working sessions, exchanges and dialogues with international financial and rating organizations such as the World Bank (WB), MSCI, FTSE Russell, the Association of Global Depository (AGC), and the Asian Securities and Financial Markets Association (ASIFMA); these organizations all highly appreciate Vietnam's reform efforts.

Deploying the KRX system after members test it, expected to be operational in May or June 2025. (Illustration: KT)

In order to continue to facilitate foreign investors' trading activities in Vietnam towards the goal of upgrading the stock market, a representative of the State Securities Commission said that many solutions will be implemented in 2025.

Accordingly, regarding the implementation of Circular No. 68/2024/TT-BTC on information disclosure of foreign institutional investors (FIIs) that do not repurchase shares: According to the provisions of Circular 68, in case the FIE does not repurchase shares, the securities company (SC) where the FIE places an order will disclose information about the FIE's unpaid transactions, including information about the authorized representative of the foreign investment organization. FTSE Russell proposed to only disclose information about the organization that does not pay for the transaction, without having to disclose information about the organization's representative. Regarding this content, the SSC proposed to amend the information disclosure appendix in Circular 68/2024/TT-BTC in the direction of removing the content of disclosing information about the identity of the authorized representative, implemented in 2025.

In addition, there are currently different ways of handling between securities companies when implementing Non-prefunding (NPF) transactions, specifically the list of securities that can use NPF services is limited at some securities companies. The determination of the amount of money required when placing a stock purchase order is different between securities companies. There is currently no consensus on the process of handling "failed trades" (error transactions) between securities companies (some securities companies sell securities, some securities companies allow investors to buy back). The signing of agreements/contracts with customers between securities companies is different. Regarding the above content, the State Securities Commission has discussed with securities companies and requested that securities companies unify the handling method, minimizing the differences when implementing the service.

Regarding the retention of foreign room for foreign investors when making stock repurchase transactions from securities companies. According to Circular 68, when securities companies use money to pay for NPF transactions but foreign investors lack money, the securities will be accounted for in the securities company's proprietary account; the remaining foreign room may be purchased, leading to the foreign investors not being able to make repurchase transactions. Therefore, foreign investors propose to retain foreign room so that foreign investors can make repurchase transactions. The KRX system will allow the retention of room until T+3. The KRX system will be deployed after members test it, with the expected operational time in May or June 2025.

Shorten account opening time for indirect investment activities

Regarding the implementation of an electronic communication system between securities companies and custodian banks (STP). Building an information exchange system between custodian banks (CS) and securities companies (CS) to serve the securities trading activities of investors opening custodian accounts at custodian banks (STP system). In addition, VSDC also plans to upgrade this system to use SWIFT standard electricity within 1 year.

VSDC has completed the addition of new functions on the current electronic communication portal system for securities companies and brokerage houses to use to exchange information to serve the securities trading activities of investors opening depository accounts at brokerage houses. Currently, the system has been basically completed, VSDC has conducted testing with market members and will put it into operation in March 2025.

Regarding the roadmap for implementing the KRX system, fully publicize the improved, different, and superior features. The Stock Exchanges and VSDCs announce the new functions and features of the KRX system before the KRX system is put into operation so that the market has full information about the KRX system. The Stock Exchanges and VSDCs promptly implement and report to the State Securities Commission.

Deploying a master trading account. A master trading account (OTA) is an account that allows a fund management company to simultaneously buy/sell securities for all funds that the company manages and does not have to execute separate buy/sell orders on each fund account as is currently the case. Deploying a master trading account will help foreign institutional investors and fund management companies simplify placing orders for funds and ensure matching orders at the same price for each fund that the company manages.

The State Securities Commission is studying to implement the initial direction applicable to foreign investment funds. Specifically, it will consider amending and supplementing Circular 120/2020/TT-BTC to add regulations on the general account of the fund management company. Clarify the process of allocating general transaction orders to detail accounting into funds and fund portfolios.

Regarding the implementation of the CCP mechanism for the Vietnamese stock market. Some tasks to implement the CCP mechanism need to be carried out such as establishing a subsidiary of VSDC; completing the payment process between VSDC and members; allowing commercial banks to become clearing members. The CCP mechanism is expected to be implemented in 2026.

Regarding the establishment of a policy dialogue group to discuss with the management agency the difficulties and obstacles of foreign investors. The policy dialogue group is responsible for regularly updating issues that need to be resolved to help foreign investors have the best market experience within the scope of legal regulations, thereby supporting the upgrade. The policy dialogue group includes members from the State Securities Commission and experts, investment funds, international investment organizations, a number of securities companies, and foreign securities companies. According to the State Securities Commission, this will be implemented in March 2025.

Finally, in order to create more favorable conditions for foreign investors, the State Bank is drafting a Circular to replace Circular 05/2014/TT-NHNN to simplify and shorten the time to open an indirect investment capital account. This amendment is expected to be completed in March 2025.

These implementation plans not only help improve the efficiency and transparency of the Vietnamese stock market but also create an important premise for upgrading the market and attracting international investment capital in the coming time.