Ho Chi Minh Stock Exchange (HOSE) partnered with Maybank Kim Eng Securities to hold a 2-day seminar called “International Experience of Exchange Traded Derivatives” for Ho Chi Minh City stock brokers and press. The seminar covered derivative products, trading order, margin requirement, derivatives clearing, regulations and risk management.
Story of Thai derivatives market
Mr. Ati Atikul, Executive vice president – Derivatives department of Maybank Kim Eng Thailand was the main speaker at the seminar. He shared his personal experience of the Thailand Futures Exchange (TFEX) when they first launched derivative trading. Their very first products were futures. TFEX trained brokers who in turn held seminars to educate investors about derivatives.
To operate in the derivatives market, brokers in Thailand are required to be members of the Derivatives Exchange, be familiar with working process, have enough capital and need to have license from the Thai Stock Exchange Committee.
The trading volume of TFEX grew rapidly after one year of launching. Thai investors were already familiar with trading index so trading futures (with underlying asset being Thailand’s SET50 Index) quickly became familiar. Retail investors take up to 55-60% of total trading volume, the rest is institutional investors.
In Thailand, originally the derivatives market comprised of 80% retail investors. After just two to three years, the trading volume of institutional traders grew much larger because of capital advantage.
More opportunities for Vietnamese investors from derivatives
For Vietnam, opening derivatives market can help fulfill the market’s integration. Investors trading stocks can also trade futures and options to hedge risks of their stock portfolios.
Opening up the derivatives market helps boost market liquidity as more players can participate: Market makers, arbitragers or brokers who join to trade stocks and derivatives at the same time. Investors will benefit from having a wider range of alternatives to hedge risks from their stock portfolios.
In Vietnam, there are a lot of equity products, yet retail investors remain oblivious to these products. Mr. Atikul said it is not a bad thing that trading volume by institutional investors outpaced that by retail investors. They would help the market grow faster in liquidity. Retail investors upon seeing the performance of institutional investors will quickly follow.
Knowledge of derivatives and organizational structure for trading derivatives are both limited. Mr. Atikul advised that before investors trade derivatives, they need to know the product features and margining process. Brokers need to learn from other markets. When a country launches the derivatives market, rules and regulations are implemented in almost the same manner as other countries.
"Vietnamese investor and brokers must learn all the regulations, risk management and trading process before they can successfully trade derivatives in 2016," he noted.