New OTC regulations in July

As of July 2007, transactions of unlisted shares on the OTC market (over the counter) must be carried out through securities companies, according to the State Securities Commission (SSC).
From that time, OTC securities will have their own trading floor, which will help increase the liquidity of OTC shares and minimise risks for investors.
Bui Nguyen Hoan, Chief Representative of SSC, said on April 14 that there would be new regulations on the operation of the stock market.

The HCM City Securities Trading Centre (HSTC) will be changed into the HCM City Stock Exchange, and there will be two main changes consequent of the restructuring. First, the scheme on periodic matching of investors’ orders will be replaced with the real-time matching scheme to be applied as of May 7, 2007. Second, shares of public companies (ones which have over VND10bil in capital and 100 investors) must make securities deposits at securities companies. Mr Hoan said that the new regulations aimed to minimise risks for OTC investors.

Mr Hoan said that it was necessary to differentiate the OTC market and the black market. The latter is the spontaneously developed market, where trading deals are not supervised and witnessed by any state agencies, and most are made in cafés.

Mr Hoan said that control would only be put on the real OTC market, which has been floated and investors have been facing risks. The liquidity of the market proves to be very low. For example, investors find it difficult to sell shares because the market is not transparent.

The trading deals of OTC shares will be more professional as investors will have to open accounts to advance security money to buy OTC shares. Sellers will be verified enterprises. The time for transactions and trading band for securities transactions will be more flexible with no ceiling for prices. These regulations will help raise the liquidity of OTC shares, according to Nguyen Ho Nam, Director General of SBS, a securities company.

Source: VNN