Vietnam mulls legalising short selling
26 August 2020 Hanoi
Image: newroadboy/Adobe.com
Vietnam’s ministry of finance is once again considering legalising short selling.
A draft circular published by the government body this week includes proposals for allowing covered short selling for the first time by opening a dedicated account with a licenced broker.
The Vietnam Securities Depository and Clearing Corporation (VSD) has offered a venue for securities lending activities for liquidity purposes since 2017 but never to create a short position.
Under the new proposal, borrowing securities for the purpose of short selling would be allowed via the VSD.
For facilitating short positions, the terms of any loan would need to include the content of the collateral, loan, loan interest, term, loan extension.
Details of collateral settlement when investors fail to return their securities and a method of resolving disputes arising, along with risks and potential damages that may incur must also be outlined.
The Vietnam Stock Exchange would be responsible for deciding which securities were eligible to be shorted under the supervision of the State Securities Commission.
The proposal was welcomed by the Pan Asia Securities Lending Association, which says that all Asia Pacific markets would benefit from implementing “transparent regulatory frameworks” that allow for covered short selling and securities lending.
“This is an important factor for global investors and index providers, as well as being integral to the development of liquid, robust capital markets that can support economic growth and prosperity,” the association adds.
Vietnam has considered opening its markets to short sellers on-and-off for several years going back at least as far as 2015 . Various proposals to allow the investment strategy were advanced during that period but were never followed through.
The latest circular was published in order to gather industry feedback but no timeframe was given for when the next steps might be taken.
The proposal follows similar discussions in The Philippines where the Securities and Exchange Commission approved the guidelines in January on securities lending and short selling in a bid to boost market activity.
A draft circular published by the government body this week includes proposals for allowing covered short selling for the first time by opening a dedicated account with a licenced broker.
The Vietnam Securities Depository and Clearing Corporation (VSD) has offered a venue for securities lending activities for liquidity purposes since 2017 but never to create a short position.
Under the new proposal, borrowing securities for the purpose of short selling would be allowed via the VSD.
For facilitating short positions, the terms of any loan would need to include the content of the collateral, loan, loan interest, term, loan extension.
Details of collateral settlement when investors fail to return their securities and a method of resolving disputes arising, along with risks and potential damages that may incur must also be outlined.
The Vietnam Stock Exchange would be responsible for deciding which securities were eligible to be shorted under the supervision of the State Securities Commission.
The proposal was welcomed by the Pan Asia Securities Lending Association, which says that all Asia Pacific markets would benefit from implementing “transparent regulatory frameworks” that allow for covered short selling and securities lending.
“This is an important factor for global investors and index providers, as well as being integral to the development of liquid, robust capital markets that can support economic growth and prosperity,” the association adds.
Vietnam has considered opening its markets to short sellers on-and-off for several years going back at least as far as 2015 . Various proposals to allow the investment strategy were advanced during that period but were never followed through.
The latest circular was published in order to gather industry feedback but no timeframe was given for when the next steps might be taken.
The proposal follows similar discussions in The Philippines where the Securities and Exchange Commission approved the guidelines in January on securities lending and short selling in a bid to boost market activity.
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