CHALK & BLACKBOARD PRESENTATION

Presenting Our

DERIVATIVES MARKET ON OTC

Group 8

TEAM

Dung

Duong

Duy

Ha

P.vy

Summany

Summany

Power Point

Present

Present

INDEX

Derivatives market

Introduction

History

Application

Participants

Classification

Chart

Timeline

Regulation

Thanks

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Data

Team

Introduction

- The OTC market in Viet Nam is an attractive investment place -2 type of markets : centralized market decentralized market - Participate in the OTC stock market offer high return but also risks

II

Derivatives Market

01. DeFination

4 types of derivatives :

1. Foward contract, 2. Swap contract 2. Future contract 3. Option contract

1.1 Over- The counter (OTC)

1. Over-the-counter (OTC) market is market where companies agree to derivatives transactions without involving an exchange (Hull, 2002)
2. Type of market that its transactions are bought or sold through the counter of bank or securities films. market has developed, and now, it is a modern stock market that is trading through computer networks
3. Over-the counter (OTC) market does not have an official trading location
4. . Banks, other large financial institutions, fund managers, and corporations are the main participants in over-the-counter (OTC) derivatives markets (Hull, 2002).

02.

History of derivaties market in Vietnam

Transaction data

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VN 30 futures contract

INTRODUCTION HERE

On August 10, 2017 Vietnam’s derivatives market offically run with the launch of the VN30 index futures derivative contract.

In 2017, 7 securities companies are concurrently trading members and clearing members, namely HSC, SSI, VPBS, BSC, VCSC, VNDIRECT and MBS.

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03.

Underlying Assets

3 types of underlying assets: • Non-financial assets (food, energy,...). • Financial assets (stocks, bonds, interest rates, exchange rates, commodities, market indexes, and currencies). • Event (weather, credit events,…)

04.

Participants

4.1 Investor

3. Arbitrageurs: is a trader who aims to generate financial gains from the difference in a security’s price in different markets.

1. Hedgers: they use derivatives markets to reduce or eliminate the risk associated with price of an asset.

4. Margin trader: are speculators who use leveraging to make purchases that are beyond the means of their current financial status.

2. Speculators: individuals or organizations that take advantage of fluctuations in the price of the underlying asset for short-term profits

Table

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* After 5 years of opening, derivatives market is interested by many investors. From there, it becomes an effective investment channel

4.2 Provider

Stock exchange

Bank Payment

Trading members

State management agencies

The Clearing Center

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According to statistics of the Hanoi Stock Exchange, in the first quarter of 2022

05. The applications of OTC derrivatives

Advantages

Disadvantage

1. It can allow small companies to engage in trade without being listed on stock exchanges. 2. It can be used for hedging, transferring trading risks, and as leverage for business operations. 3. It can allow for increased flexibility as the companies don’t have to abide by the standardised norms vis-a-vis exchange-traded derivatives. 4. It can allow companies to provide stable prices to their customers

1. Any OTC contract runs the associated risk of credit or default as there is central mechanism to clear and settle the transactions.2. Any OTC contract is fraught with inherent and systemic risks in the absence of standardised regulations and norms. 3. OTC contracts are inherently speculative, thus having the possibility of creating market integrity issues and forcing traders to make losses.

Summary table of VN30 futures transaction data from 2017-7/2022.

06.

Classification of derivatives

6.1

Foward Contract

6.2

Swap contract

Table: Value of swap contract at Vietnamese commercial banks (2019, 2020, 2021)

Table: Credit default swaps (CDS) of Vietnam and some Southeast Asian countries (2017)

6.3

Option contract

Table: Currency Options Sales:

07.

The regulations

1. Vietnamese organizations and individuals and foreign organizations and individuals participating in securities investment and operating on the Vietnamese derivatives market. 2. Other organizations and individuals related to securities activities and the securities market.

7.1

Subjects of application

7.2

Regulations on securities listing

1. In Vietnam, according to Law 2006 No. 70/2006/QH11 regulating the secuirities market,the entity that organizes the trading market, including the OTC market 2. The OTC market is considered to be a market where securities are listed and traded with a lower quality than the centralized market 3.must ensure two requirements: One is to allow securities that are not yet eligible for listing on the centralized trading market to be listed and trade here; The second is to prevent poor quality securities from being traded in this market to ensure the health of the market.

7.3

Regulations on trading members

2 types of market participants, including ordinary members and market makers. -Ordinary members: enter the OTC market as a broker or a securities dealer, conduct securities transactions on behalf of the client, for the benefit of the client (broker) or in his or her own name, because own interests (self-employment). -Market makers: enter the OTC market as a broker or a securities dealer, conduct securities transactions on behalf of the client, for the benefit of the client (broker) or in his or her own name, because own interests (self-employment). .

Regulations on transaction

7.4

*the OTC market include: the order and procedures for continuous transaction execution, transaction methods, payment methods and other issues. * According to Law 2006 No. 70/2006/QH11 regulating the secuirities market.

7.5

Regulations on information disclosure

Transparency and disclosure of information on the stock market is a prerequisite for the stable and healthy operation of the market. Information on the OTC market includes: Information about organizations whose securities are listed and traded on the market; information about the trading members themselves, information about the transactions performed (including the bid and sale prices of securities, the volume of transactions...). Owners who may be involved in the OTC market are responsible for full, accurate, and suspended disclosure of information in accordance with the provisions of these laws and regulations

THANKS!

group 8