Intraday short sale far from being realised as difficulties persist

Securities firms and investors are waiting for the T+0 or intraday short sale to be applied on the Vietnamese securities market, but there are still troubles that need to be resolved.

T+0 mechanism is regulated in the Circular 203/2015/TT-BTC issued by the Ministry of Finance on December 21, 2015 to increase liquidity for the Vietnamese securities market and bring the local market closer to international standards.

However, the mechanism has not been realised since then as there are many difficulties with it. The T+0 is the ability to complete a stock transaction during the day on settlement, payment and transfer of stock ownership.

According to the Vietnam Securities Depository (VSD), once the T+0 system takes effect, it could boost trading liquidity and benefit both investors and securities firms, especially when the market vulnerable to the volatility of the global markets amid fears about the instability of economic and political relations and the spread of coronavirus.

But it has remained unclear when the system will be deployed for the Vietnamese stock market. According to Le Hai Tra, acting chairman of the board of directors at the Ho Chi Minh Stock Exchange, the T+0 trading may be tested in the second half of 2020.

Investor Nguyen Trong Hung said technology and policy are not the challenges, it is the co-operation between stock exchanges, VSD and market regulators.

Investor Nguyen Kim Sang said investors are exposed to potential risks at the moment as they cannot buy and sell shares in the same day while share prices can swing pretty much during one day.

According to VSD, risk management is the top priority for both securities firms and market regulators if T+0 mechanism is applied.

Several brokerages have had to delay the settlement of transactions or cancel the transactions as they cannot control the risk caused by margin lending activities.

Securities firms are asked to develop a tight risk management process and assure their resources are efficient to settle all transactions if investors fail to do so.

Tan Viet Securities Corporation (TVSI) has been prepared for the T+0 system to be deployed, deputy general director Ta Minh Phuong told tinnhanhchungkhoan.vn.

The mechanism offers investors more opportunities to earn profits because it increases the liquidity on the market but trading will become more complicated, he said.

Some transactions have to be cancelled because investors’ outstanding loans are very high, he said, adding the cancellation will have subsequent impact on market trading.

“Not only securities firms, VSD also has to improve its technological background to meet the demand for th T+0 trading system,” Phuong said.

Investors’ accounts must be tracked closely and their outstanding loans monitored, he said.

Tran Thang Long, director of market analysis and research, BIDV Securities Corporation, said the company has upgraded its technological system to prepare for a hike in trading liquidity.

The T+0 system will allow investors to short shares in advance of receiving. It now takes investors two days to receive the shares they buy before being able to sell.

Active investors and traders can make many transactions more during the day if T+0 trading is allowed, increasing the market liquidity and it requires securities firms to upgrade their facilities and prepare for such scenarios, Long said. 

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