Decree 42/2015 is an entirely new decree governing “derivative securities” (chứng khoán phái sinh) and will take effect from July 2015. A quick read of Decree 42/2015 seems to indicate that Decree 42/2015 is intended to provide a legal framework for a regulated market for derivatives in Vietnam. In particular, Decree 42/2015 provides detailed requirements for:
- Setting up an exchange for derivative securities - only a licensed stock exchange can set up an exchange for derivative securities;
- Members of an exchange for derivative securities – only securities companies with an equity capital of VND 600 billion or more or commercial banks with equity capital of VND 7,000 billion or more;
- The type of derivative securities that can be traded on the exchange for derivative securities including forward contracts (hợp đồng tương lai, hợp đồng quyền chọn), listed options (quyền chọn niêm yết) and other listed or negotiated derivatives which have reference assets being listed securities; and
- Payment and set-off mechanism for settlement of derivative securities.
Unfortunately, Decree 42/2015 is not clear how derivative securities could be created, issued and listed in the exchange of derivative securities. For example, it is not clear whether and how a public offering of derivate securities can be conducted.
In addition, it is not clear whether Decree 42/2015 applies to privately negotiated derivative contracts. This is because the concept of “derivative securities” under Decree 42/2015 also includes derivative contracts (e.g. forward contracts) and negotiated derivative securities (chứng khoán phái sinh giao dịch thỏa thuận). In addition, an exchange of derivative securities is also broadly defined as a place or a platform where sell and purchase orders for derivative securities are consolidated or where payment or set-off for settlement of derivative securities occur.
If Decree 42/2015 applies to privately negotiated derivative contracts then it would exclude many type of derivative transactions and would require permitted derivative transactions to be reported to the VSD. Currently Decree 42/2015 only allows reference assets of a derivative securities to be securities. Therefore, derivative contracts with reference assets being currency, interest or commodities are not recognised by Decree 42/2015.