The Prime Minister has issued Decree 42/2015/ND-CP on derivatives and the derivative trading market in Vietnam, which will become valid next month.

Under the new decree, companies that trade derivatives for profits on the derivative trading market must have at least 600 billion VND (27.8 million USD) in chartered capital.

Brokerage firms on the new market should have at least 800 billion VND (37 million USD) in chartered capital and will be allowed to trade derivatives for their own profits.

Firms should also meet the requirements set by the Ministry of Finance on profit, disposable capital, and professional procedures.

Securities firms and commercial banks may sign up to become clearing members at Vietnam Securities Depository (VSD) that will settle trading orders if they satisfy some regulations on equity, including that the equity of a direct clearing member remains less than that of a general clearing member.

In detail, a commercial bank should have equity of at least 5 trillion VND (231.5 million USD) to become a direct clearing firm and at least 7 trillion VND (324 million USD) to become a general clearing member.

A securities firm should have at least VND900 billion ($41.6 million) to become a direct clearing member and at least 1.2 trillion VND (55.5 million USD) to become a general clearing member.

hus, 15-20 securities firms that meet the requirements set by the Finance Ministry will operate their businesses on the Vietnam's derivative trading market.

In order to prepare for the promising derivative market, large securities companies have issued more shares to increase their chartered capital and support their clients in this new market.

For example, Bao Viet Securities Company (BVS) in its annual shareholder meeting decided to increase its chartered capital by 1 trillion VND (46.3 million USD), which should not be a problem for the company.

Nhu Dinh Hoa, BVS Director General, said derivatives will have a bright future in Vietnam, just like at the Taiwan Stock Exchange, where derivative trading occupied 70 percent of the total securities market.

Other large securities firms, including Vietinbank Securities Joint Stock Company, Vietcombank Securities Joint Stock Company and Saigon-Hanoi Securities Joint Stock Company also plan to raise their capitals to enter the derivative market.

Derivative is a security on the securities market which is used to reduce financial risks, protect initial investments, and generate profits for investors.

On the securities market, no matter how stocks and bonds change in market values, derivatives will maintain their initial market values.

Derivatives are futures, options, and forwards that are traded on the stock exchange and listed securities that are traded on the stock exchange.

Stock exchanges, including the Hanoi Stock Exchange and the Hochiminh Stock Exchange, are the only legal organisations can hold derivative trading activities.-VNA