Intelligent Financial Research & Consulting (IFRC)
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Virtual Derivatives Markets Platform

LEARNING, MAKING ERRORS BEFORE TRADING

Vietnam to enter “Emerging Market”

Launch of Vietnam Derivatives Market (2017)

  • In 2014, Vietnam’s Prime Minister, ratified Decision 366/QĐTTg  to establish a derivatives market. The Decision is broken down into 3 phases: (i) 20132015: legal framework and technical infrastructure, (ii) 20162020: conduct derivatives transactions and (iii) 2020: develop a complete market.
  • Launch of Index Futures (VN30) in 2017
  • Launch of Bond Futures () in 2019
  • Launch of Stock Warrant () in 2019
  • Derivatives market success depends on the quality of the underlying market: Index Futures interconnected to the Equity market. At the beginning of 2019, Vietnamese government announced new solutions to restructure the stock market …
  • There is still a long way ahead with such a lot of great efforts need to be made for Vietnam to enter “Emerging Market”

 

But 5 years after, the Vietnam Derivatives are still unsuccessful because not ready

  • Index underlying (VN30) not liquid enough: FTSE Vietnam ETF, and Van Eck Vietnam ETF have about 15-20 constituents
  • Futures contract specifications to review
  • Some Clearing requirements are not available or to have to be modified: intraday call margin not yet possible, final settlement (last index value) could be manipulated
  • Market conditions such as short selling, indispensable for hedging not available
  • No actual market makers for ensuring the derivatives market liquidity
  • 90% of derivatives users are retailers; they are not trained, not warned about the risk of the index futures product. In international market, very restrictive access for retail investors. 
  • Lack of derivatives market and products knowledge

Derivatives products are very sophisticated financial contracts. Double edged sword

  • For Institutions: Even with advanced users, inadequate use of derivatives may cause severe problems and even bankruptcy of firms. Only one trader can cause a loss of more than $7 Bn to Société Générale. Other historic disasters: Soros Investment Management (2000, $2Bn),
  • For Retailers: False / incomplete knowledge and lack of control can lead to personal financial disasters

But Derivatives Market need is indisputable, its success is very important for Vietnam

  • Some international figures
  • Vietnam is still qualified as Frontiers market. In ASEAN, Singapore is classified ass developed country; Thailand, Malaysia, Indonesia, Philippines are emerging. Vietnam is superior to Cambodia, Laos, Myanmar and Brunei only. Derivatives market with successful products is one of criteria to be upgraded Frontiers to Emerging country.
  • Derivatives represent High business for the exchange, banks, brokers, …
  • Derivatives represent job opportunity and especially for Students

In addition to solving difficulties and barriers

(underlying design, product specification, infrastructure, market rules, organization, control), it is urgent to prepare the players in this market well: 

  • Market Organisation and Supervision (Exchange)
  • Market Control (Regulator)
  • Market Clearing (Clearing House)
  • Brokers (Banks, Financial companies, …)
  • Investors (institutional and Retailers)

and finally the students who will be the actors in the job market of tomorrow.

Existing products (Index/Bond Futures, Call Warrant) will necessarily be extend to other market such as Agriculture, Energy, Currency, …

Prepare for Tomorrow, Today

 

 

Solution may be the Virtual Derivatives Markets Platform

 

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