Derivatives

1.    BASIC KNOWLEDGE ON DERIVATIVES

  •   Definition of Derivatives:
-  Derivatives is a financial security that includes numerous financial instruments with a value that relies upon or derived from an underlying asset (non-financial assets such as commodities, metals, energy, weather etc. or financial assets such as stocks, market indexes, bonds, currencies, interest rates etc.).
-  Strike price and maturity date are defined when Both Parties agreed to the contract.
-  When contract ends at maturity date, there are two methods of payment between Both Parties: cash payment or exchange of physical goods at pre-determined Strike price.
-  Derivatives are traded on the Stock exchanges (contracts are standardized according to criteria set forth by the SSC) and on the OTC (no standardization, high flexibility and high risks).


  •   Financial instruments of derivatives
-  Currently trading on the HNX Stock exchange
   +  Futures contracts of VN30 Indexes
   +  Futures contracts of Government Bonds
-  Currently trading on the HSX Stock exchange
   +  Covered Warrant (long position) of pre-determined underlying assets (VN30 Index or HNX30 Index) by the SSC
-  Currently trading on the OTC
   +  Forward contracts on interest rates
   +  Swaps
   +  Forward contracts on currencies
   +  Options
   +  Etc.
-  Please note: when trading derivatives, investors need to settle all profits/losses derived from open positions daily.

2.    FUTURES CONTRACTS


  •   Definition of futures contracts
-  Futures Contracts belong to the derivatives category. A futures contract is a standardized legal binding agreement between the buying and selling parties to buy or to sell of an underlying asset at a pre-determined price, at a specified time in the future.
-  Differences between Basic Stock & Futures Contracts
Comparison contents
Basic Stock
Futures contracts
1.     Issuing quantity Limitations set by Issuers No Limitation
2.     Short sell Illegal to participate in Vietnam Is allowed to participate in short selling without possessing underlying asset
3.     Cash needed for transactions Total valaue of buying stocks Initial margin set by Securities Companies
4.     Settlement Right after transaction is finalized At a pre-determined time in the future

  •  VN30 Index Futures
-  VN30 Index Futures: A type of Futures contracts with the underlying asset ~ VN30 Index
-  Each futures contract has 4 different maturities “months” including the current month, the following month and 2 last months of closest 2 quarters. For example: In the current month of August, 2019, there are 4 contracts including: matured month of August, 2019 (current month):
·         VN Index Futures with expiration month in August, 2019
·         VN Index Futures with expiration month in September, 2019
·         VN Index Futures with expiration month in December, 2019
·         VN Index Futures with expiration month in March, 2020
-  VN30 Index Multiplier – is 100.000 VND
-  Types of investors allowed: Individuals and institutional investors
-  Details of VN30 Index Futures can be summarized as follows:


No Characteristics VN30 Index Futures contract
1
Name of contract VN30 Index Futures contract
2
Contract ticker/code In accordance with naming regulation at the HNX, for example: VN30F1709
3
Underlying asset VN30 Index
4
Contract size 100.000 VND x VN30 Index price
5
Contract multiplier 100.000 VND
6
Expiration month Current month, following month, last 2 months of two closest quarters
For example: Current month is July. Matured months would be July, August, September and December
7
Transacting time Open time is 15 minutes earlier than securities market trading period
Closing time: same with securities market
8
Trading unit 01 contract
9
Reference price Closing price of previous day
10
Allowable fluctuation range 7%
11
Tick size 0.1 Index price
12
Order limit 500 contracts/order
13
Listing date Launch of market
14
Last trading date Third Thursday of matured month, in case it coincides with holidays, the date will be moved to the closest previous date
15
Last allowable settlement date The following working day after last trading day
16
Method of payment Cash settlement
17
Method of identifying settlement price Value of underlying asset on the closing price of last trading day.
  •   Futures contracts on Government bond
-  It is a variation of futures contracts with the underlying asset as an assumed Government bond, with characteristics similar to a Government bond in terms of principal, interest, and specified time based on the reference price of trading Government bonds.
-  Each futures contract of Government bond has 3 different maturity “months” based on quarter cycles, they are on March, June, September, and December. At the listing date, Government bond futures has 3 different maturity dates which are based on the latest 3 quarters. For example: On the current month of February, the Stock Exchange lists futures contracts on Government bonds that will mature on the following months, March, June & September.
-  The multiplier is 10,000 VND
-  Contract size is 1,000,000,000 VND
-  Allowable types of investors: Professional investors and Institutional investors
-  Please note: Method of settlement will be via the transfer of assumed physical Government bond into an actual trading Government bond converted via a pre-determined set of conversion coefficient calculated on the last settlement date.
-  Details of Government bond futures can be summarized as follows:



No
 

Characteristics

Government bond futures
1
Name of contract Government bond futures
2
Contract code In accordance with regulations set by the HNX
3
Underlying assets Assumed Government bond
4
Size of contract 1.000.000.000 VND
5
Contract multiplier 10,000
6
Expiration months 3 different maturity months based on nearest quarter cycles, they are March, June, September and December
7
Trading time Opens 15 minutes before securities market
Closes at the same time as securities market
8
Trading unit Minimum 01 contract
9
Reference price Closing price of previous trading day
10
Allowable fluctuation range 3%
11
Listed date Launch of market
12
Last trading date On the 15th day of the maturity month or on the previous day of that date if the 15th falls on a holiday
13
Last settlement date The 3rd working day after the last trading day
14
Payment method Transfer of physical goods. The seller chooses and decides to transfer one of the allowable Government bonds in a pre-determined basket to settle physical obligation with the buyer.
 
3.    STEPS OF TRADING AT KBSV
Step 1: Open derivative trading account at KBSV
  •   Please open a derivative trading account at KBSV's branches or contact Phone number (+84) 24 7303 5333/ (+84) 28 7303 5333, or call for brokers (if have) for instructions.
  •   Note: To open a derivative trading account, customers need open a stock trading account at KBSV. In case the customer does not have a stock trading account at KBSV, please register to open an online account click here or visit KBSV's branches.
Step 2: Deposit to a derivative trading account at KBSV
In order to place an order on a derivative trading account, the customer needs to deposit to the derivative trading account at KBSV in 3 ways:

  •   Customers can trade via KBSV’s branches.
  •   Customers call via number: (+84) 24 7303 5333 or (+84) 28 7303 5333 and follow the instructions
  •   Customers can transfer money via KB TradeDS, KB MobileDS
Detailed instruction click here

Step 3: Deposit to VSD
After depositing to a derivative trading account at KBSV, customer need to deposit into VSD in 3 ways:

  •   Customers can trade via KBSV’s branches.
  •   Customers call via number: (+84) 24 7303 5333 and follow the instructions
  •   Customers can transfer money via KB TradeDS, KB MobileDS
Detailed instruction click here

Step 4: Derivative trading at KBSV
Customers can place orders to buy and sell via KBSV's trading channels as follows:
1.    Online trading (KB-TradeDS)

2.    Derivatives trading via mobile (KB-MobileDS)
  •    Please download the KB - MobileDS app on the phone
o    For Android: Download KB-MobileDS App on Google Play
o    For iOS: Download KB-MobileDS App on App Store

  •   Download User Guide for KB-MobileDS click here
3. Trading via KBSV’s branches
Please visit KBSV’s branches for trading as following addresses:
  •   HO branch: Level G, Sky City Tower, 88 Lang Ha, Dong Da, Hanoi.
  •   HN branch: Level 1, Office Building, 5 Dien Bien Phu, Ba Dinh, Hanoi
  •   HCM branch: Level 2, TNR Tower Nguyen Cong Tru, 180-192 Nguyen Cong Tru, District 1, Ho Chi Minh
  •   SG branch: Level 1, Saigon Trade Center, 37 Ton Duc Thang, Ben Nghe Ward, District 1, Ho Chi Minh City  
Step 5: KBSV settles daily profit/loss
  •   VSD và KBSV will daily calculate and settle profit/loss on customer’s derivative trading account.
  •   In case the account has a gain position, KBSV shall settle profit on customer’s trading account.
  •   In case the account has a loss position, Customer needs to deposit into his/her account at VSD to ensure the transaction rate as prescribed by the management agencies.
Step 6: Customer withdraws from a derivative trading account
Customer makes a withdrawal from VSD's deposit account à Derivative trading account at KBSV à Stock trading account à Cash / Customer’s bank account
Detailed instruction click here

Note: Customers can only withdraw from VSD when the balance of derivative account ensures the regulated ratios of KBSV and VSD.