Knowledge

1. What is derivatives? Derivatives are financial instruments whose values are based on an agreed-upon underlying assets. Common derivatives include: Forwards:

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Knowledge

Derivatives are financial instruments whose values are based on an agreed-upon underlying assets. Common derivatives include:

  • Forwards: an agreement between two parties to buy an underlying asset at a pre-determined price and on a pre-specified future date.
  • Futures: a standardized forwards contract written by a clearing house that operates an exchange where the contract can be bought or sold.
  • Swaps: a contract to exchange cashflows on or before a prespecified future date based on the underlying value of currencies exchange rates, bonds/interest rates, commodities exchange, stocks or other assets.
  • Options: a contract that gives the owner the right, but not the obligation to buy (a call option) or to sell (a put option) an underlying asset at a pre-determined price (the strike price) and on a pre-specified future date.

In the experience of countries that have developed derivatives market, futures and options are the most popular products. However, options is a more complex and advanced product, which may be difficult for majority of investors in the early stage of the market. Meanwhile, futures trading has many similarities with stock trading, in line with the criteria of product design simplicity and its ease of use. Therefore, futures is chosen as the first derivatives product to be launched in Vietnam.

To step-by-step help investors familarize with new instruments, in the first phase of the market, two futures products which are index futures (on VN30 and HNX30) and bond futures will be introduced. Other derivatives products will be launched when market conditions are appropriate.

No.

Specification

Index futures on VN30

Index futures on HNX30

Government bond futures

1

Contract name

Index futures on VN30

Index futures on HNX30

Government bond futures

2

Contract code

VN30Fyymm

HN30Fyymm

VB05Fyymm

3

Underlying asset

VN30 index

HNX30 index

5-year government bond with par value 100,000 VND, coupon rate 5%/year, annual payment. Principal is paid at the maturity.

4

Multiplier

100,000 VND

100,000 VND

10,000 VND

5

Contract size

100,000 VND * (VN30-Index futures price)

100,000 VND * (HNX30-Index futures price)

1,000,000,000 VND

6

Contract month

Spot month

Next calendar month

Next two quarterly months

Spot month

Next calendar month

Next two quarterly months

Next three quarterly months

7

Trading method

Order-matching
Put-through

Order-matching
Put-through

Order-matching
Put-through

8

Trading time

ATO: 08:45 – 09:00

Continuous order-matching (morning): 09:00 – 11:30

Continuous order-matching (afternoon): 13:00 – 14:30

ATC: 14:30 – 14:45

Put-through: 08:45 – 14:45

ATO: 08:45 – 09:00

Continuous order-matching (morning): 09:00 – 11:30

Continuous order-matching (afternoon): 13:00 – 14:30

ATC: 14:30 – 14:45

Put-through: 08:45 – 14:45

Operning time: 15 minutes earlier than bond market
Closing time: same as the bond market

9

Price limits

+/-7%

+/-10%

+/-3% of reference price

10

Price tick

0.1 index point (equivalent to 10,000 VND)

0.05 index point (equivalent to 5,000 VND)

1.0 (equivalent to 10,000 VND)

11

Unit

01 contract

01 contract

01 contract

12

Final trading day

The third Thursday in the contract month. If that day is a holiday, final trading day will be adjusted to the previous trading day

The third Thursday in the contract month. If that day is a holiday, final trading day will be adjusted to the previous trading day

The date 15th in the contract month. If that day is a holiday, final trading day will be adjusted to the previous trading day

13

Final settlement day

The next business day after the final trading day

The next business day after the final trading day

The next three business days after the final trading day

14

Payment method

Cash settlement

Cash settlement

Physical delivery

15

Method to determine
Daily settlement price

According to VSD regulations

According to VSD regulations

According to VSD regulations

16

Method to determine Final settlement price

VN30-Index price on the final trading day

HNX30-Index price on the final trading day

Daily settlement price on the final trading day

17

Reference price

Daily settlement price on the previous trading day or theoretical price (on the first trading day)

Daily settlement price on the previous trading day or theoretical price (on the first trading day)

Daily settlement price on the previous trading day or theoretical price (on the first trading day)

18

Position limits

The maximum number of contracts in one trading account:

- Professional investors: 20,000
- Institutional investors: 10,000
- Retail investors: 5,000

The maximum number of contracts in one trading account:
- Professional investors: 20,000
- Institutional investors: 10,000
- Retail investors: 5,000

According to VSD regulations

19

Initial margin rate

According to VSD regulations

According to VSD regulations

According to VSD regulations

20

Issuing date

When launching futures contracts

When launching futures contracts

When launching futures contracts

21

Order limits

1,000 contracts/order

1,000 contracts/order

1,000 contracts/order

22

Criteria for delivered
bonds

 

 

Government bonds with maturity time to final settlement day of 3.5 – 6.5 years. The minimum issuing amount is 2,000 billion VND. Conversion
factor is calculated based on coupon rate of 5%/year.

Derivatives provide for investors more instruments to hedge risk, speculate and arbitrage

  • Investors can experience some features which have not been allowed in the stock market such as short selling, intraday trading and daily settlement
  • In terms of capital usage, high leverage effect in derivatives market means that investors are able to trade a large notional amount with relatively small amount of capital
  • Last but not least, exchange-traded derivatives products will help investors mitigate counterparty risks since clearing process is conducted via CCP (Central Clearing Party) which is a buyer of all sellers and a seller of all buyers
Open account Equity market Derivatives market Price board
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