The Hanoi Securities Trading Center (HaSTC) has stated that all necessary preparations have been made to launch the over-the-counter (OTC) market in June 2008 for unlisted stocks of public companies. During the first phase, 40 companies including 20 brokerages, 5 insurers and 15 banks will be selected for trading of their stocks in the new platform. The exchange was originally scheduled to debut in March but the opening was put off by the HaSTC to the end of June, due to delay in preparations and recent turmoil of stock market in Vietnam.
The trading regulations on the new platform has been approved by the Ministry of Finance under Decision No. 3567/QD-BTC dated 8 November 2007 on approving the organization scheme and management of securities transactions of unlisted public companies (Decision 3567). Below is the summary of the rules for the organized OTC market:
- The list of OTC companies is maintained by the State Securities Commission (SSC). As of 09 May 2008, 950 unlisted public companies have been registered with the SSC (among over 2,500 companies on the OTC platform).
- The OTC market comprises only public, but unlisted, companies. These companies are subject to the 2006 Securities Law. Under the law, a company which (1) makes public offering; or (2) has shares owned by at least 100 investors excluding institutional investors and has the authorized capital of VND10 billions or more, shall be treated as a public company and is obligated to register as a public company with the SSC. So far, unlisted public companies are mainly subject to the rules of corporate law (2005 Enterprise Law), and certain rules for disclosure & reporting requirements only.
- Under Decision 3567, all securities in any public company (i.e. all OTC companies) will be held in the Vietnam Securities Depository. All trades in securities of OTC companies must occur through brokerages, i.e. registered securities companies.
- All transactions must be reported to the HaSTC which will collate and disseminate amongst all brokerages information concerning the trades. The information will also be published on an automated board. Prices and trading volume on the OTC market will be displayed on the screen every time an order is matched.
- Trading on the market will be through negotiation but within a trading band of 20% above and below a reference price (compared with 1% and 2% now applied for the HCM City Stock Exchange and HaSTC). The reference price will be determined by the HaSTC. Settlement will usually need to occur within 3 days of the trade. Trading may occur at any time but brokerages will be required to input the trading results into the system from 10:00 to 12:00 and 13:00 to 15:00 every working day.
For the foreign ownership cap in the newly-organized OTC market, the SSC said that the cap could be 30 to 49% for overseas investors, subject to specific sectors in which foreigners may be limited. Foreign ownership cap now in listed companies (in HOSE and HaSTC) is 49% equity except for certain sectors such as banking (30%).
Written by Dang The Duc, Managing Partner
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