Vietnam publishes new regulations for derivatives market
06 July 2015
On 1 July 2015, Decree 42/2015/ND-CP (Decree 42) became effective. This represents the first phase in setting out the legal framework for trading derivatives securities in Vietnam and is an important step in the development of the derivatives market in Vietnam generally.
To date, the derivatives market and related legislation in Vietnam has been in its infancy. Before Decree 42, permissible derivatives were limited to basic currency products such as foreign exchange transactions, interest rate swap transactions and commodity swap transactions entered into for hedging purposes between a Vietnamese bank or a Vietnamese branch of a foreign bank (each licensed under the relevant regulations of the State Bank of Vietnam (SBV)) and a Vietnamese counterparty. A licensed Vietnamese bank or a Vietnamese branch of a foreign bank could also enter into cross-border derivative transactions (such as an interest rate swap) with an offshore counterparty depending on the transaction and counterparties involved and subject to approval from SBV which was granted on a case-by-case basis.
There was a change when futures and options were both recognized as concepts under the 2006 Vietnamese Securities Law (Law on Securities) which defined them as securities which can be tradable in the securities market. However, the Law on Securities did not provide details on the trading, clearing and settlement of these products.
However, this is now changing. The plan on the development of a regulated market for trading derivatives in Vietnam was approved by the Prime Minister in March 2014, making way for this latest development. Decree 42 was issued on 5 May and came into force on 1 July 2015.
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