OTC market to be monitored

Delegates who attended a seminar recently organised by the State Securities Commission (SSC) in Hanoi all shared the view that it’s time the over-the-counter market in Vietnam should be monitored.

According to SSC’s draft plan, unlisted public companies will have to register and deposit their shares at the Securities Depository Centre through a securities company which is a depository member.

Investors who want to carry out transactions of OTC shares have to open accounts at a securities company. Transactions will still be carried out through negotiations but all selling and buying orders will have to be carried out through their accounts at securities companies. These orders will then be transferred to a new system for regulating OTC transactions at the Hanoi Securities Trading Centre, allowing brokers to gain access, find buyers and sellers and make deals for investors.

HaSTC will collect results of transactions and then transferred to the depository centre within the same day for accounts’ balance.

Regulations on transactions on the OTC market will not be as tight as those on listed shares. There are no regulations on reference price, price fluctuation margin and trading unit. Investors can buy and sell one kind of stock within one trading day and payment settlement date will be T + 3, like the settlement applied to current transactions of listed stocks.

Experts hope that trading OTC shares through brokerages will help reduce risks for investors.

The SSC plans to select some public companies working in the financial, banking, insurance and securities sectors to make a trial run of the new OTC procedures in November before operating officially in early 2008.

Representatives of securities companies including Bao Viet, Thang Long and SSI all welcomed the SSC’s plan. However, they voiced their concerns over the possibility that securities companies will be swindled of their commissions for OTC trades by investors if there are no regulations referencing prices and price fluctuation margins.

“If there is no price fluctuation margin, investors may collude with each other to set up lower prices in order to cheat on commission fees.

Some have proposed a price fluctuation margin of 20% while some others insist that there should be reference prices. This will help prevent artificial inflated transactions, protecting small, individual investors and ensure a basis calculating fees and commissions for securities companies.

A Bao Viet Securities representative also proposed a common par value of VND 10,000 for shares of public companies as of now the par value of shares of public companies varies from VND 10,000, VND 100,000, VND 1 million.

All delegates urged the SSC to pour proper investment into a modern infrastructural facilities and information technology for the monitoring of this OTC market so as to ensure that it operates smoothly, meeting the market’s development for at least five years.

They also asked SSC to encourage public companies to fulfill their responsibilities in information announcements to investors, ensuring fairness, publicity and transparency in securities market activities.

The monitoring of transactions of shares of unlisted public companies can be considered as one of the measures to strengthen the supervision of the securities market so as to help ensure a health and sustainable development of Vietnamese stock market.

Source: VNE