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How to execute derivatives securities trading



 I. Derivatives Market's Legal Structure

II. Some abbreviation terms

  • CCP: Central Counter Party Clearing House
  • CM: Clearing member
  • NCM: Non clearing member
  • GCM: General clearing member
  • DCM: Direct clearing Member
  • IM: Initial deposit
  • IMd: due Initial deposit to transfer of material
  • MR: Required deposit level
  • SM: Support deposit level
  • TA: Depository account of investors opened at Securities companies
  • TAT: Derivatives transaction account
  • TAM: Deposit transaction account
  • VM: Change in deposit. The daily profit/loss arising from price movements of all non-netted positions and net position on the Investor account.
  • DSP: End of Day settlement price
  • FSP: Final settlement price
  • AI: Is the bond interest is not paid from the previously interest payment period till the final payment date (provided by the Stock Exchange)
  • M: Multiplier
  • CF: Conversion factor (provided by the Stock Exchange).

III. The rates of warning and deposit using thresholds

When the rate of use of deposit of investors: 

  • Level 1, 2: CCP will send warning to Clearing Member to inform investors
  • Reach Limit level: CCP will send request to HNX for stopping account transactions and request Clearing Member to announce that investors to submit additional deposit or close positions.

For example: On June 2, 2017, at 9:00AM, investor A traded 20 HNX30F1706 buying position at 130, with multiple = 1,000, IMrate = 9%. Then, the transaction price of the product fluctuate as follows:

  • At 10:00AM: HNX30F1706 is 127
  • End of Day settlement price (DSP): 140

Investors deposit before the transaction is 280,000, the threshold of use of deposit collateral is 100%.

Price IM VM MR=IM+VM Collateral Collateral Usage
130 234.000 0.00 234.000 280.000 83,57%
127 228.600 (60.000) 288.600 280.000 103,07% => Account is stopped trading (investors have to add deposit / pay losses to ensure the collateral rate)
140 252.000 200.000 252.000 280.000 90%


What is derivatives securities (DS)

DS is a type of financial instrument that is valued based on the value of one or more underlying assets. DS is reflected in many types of contractual arrangements, which stipulate the rights and obligations of the parties to the payment in cash, the transfer of underlying assets at a pre-agreed price at a certain point of time in the future.

The underlying assets of DS are divided into 02 types:

  • Non-financial assets: food (cereals, meat, coffee, pepper, etc.), metals (gold, silver, zinc, etc.), energy (gas, oil,…), others (weather, election results, etc...)
  • Financial assets: stocks (stock indices, single stocks), bonds (government bonds, local bonds, corporate bonds, bond indices), interest rates (interbank rates, foreign exchange rates), exchange rates (exchange rates against strong currencies such as the USD, JPY, EUR, ...), and even on Derivatives (high rate DS, valuation based on basic DS contracts)

Who uses derivative securities?

Comparison criteria Hedging (Hedgers) Speculators Arbitrageurs
Purpose Preventing price volatility risks
  • Place bets on future volatility in the opposite direction of hedger
  • Increased profits through financial leverage
  • Take advantage of market valuation different
  • Seeking risk-free profits
Risk appetite Risk aversion Accept high risk  
  • Financial institutions
  • Non-financial institution
  • Investors
  • Government
  • Organization
  • Retail Investor
Usually a financial institution, business organization on the DS market
Position Underlying assets and Derivative Securities (concurrently) Derivative securities
  • Simultaneously buy and sell the same tool in two different markets
  • Simultaneously buy and sell on the spot and DS markets


What are the basic types of DS contracts?

  • Forward contract: An agreement between the buyer and the seller about the transfer of an asset at a certain point in the future at a pre-determined price at the date of execution of the contract.
  • Futures contract (FC): This is a form of forward contract, but the contents relating to the underlying assets, method and time of transaction - clearing - payment ... have been approved and agreed on the contract form by the "Standardization" governing body. Futures contracts are listed and traded on the Derivatives Exchange
  • Option Contract: A financial agreement whereby a party has the right to demand execution and the other party has the obligation to purchase or sell a quantity of the underlying asset at a predetermined price for a period of time or at a certain time in the future. Option contracts can be traded in OTC and centralized markets
  • Swap Contract: A swap contract is a financial agreement whereby one party commits to swap a financial instrument's cash flow with the rest of the financial instrument's cash flow over a specified period of time.

What are some differences between Basic market and Derivatives Market?

Content Spot market Derivatives market
Basic features Spot delivery Delivery in the future
Listing/cancel listing method According to the request Issuers and meet SSC/exchanges regulations Automatic based on Exchanges’ regulation
Get trading results from Exchanges Send 1 time after the end of trading day Send each transaction in real time immediately after the transaction is matched
Swap position N/a Immediately after receiving transaction results
Offset position N/a Automatic for regular accounts, as required for blended accounts
Settlement of payment obligations Effective in the morning T + 1 for bonds; Morning T + 2 for stocks and fund certificates Effective on the afternoon of the T day for position profit/loss position payments, maturity payment in cash; T +3’s morning for maturity payment of material transfer of bond's FC
Payment T+1 for bonds; T+2’s afternoon for stocks, fund certificates T+1 morning for position profit/loss position payment; T+3 for material transfer payments
Deposit 100% money, 100% of the sold stock According to the initial deposit level determined by the CM, which guarantee is not lower than the required amount of VSD and the maintenance deposit value calculated by VSD for each account.




Purpose of Inquiry

Secured No.

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