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Small brokers fear intra-day trading will lose them clients

Update: July, 11/2015 - 09:39
The broker company must have equity capital or charter capital of VND800 billion; full appropriate reserves to hedge share declines; and a working capital ratio of at least 220 per cent in the last 12 months. — Photo vietstock
HA NOI  (VNS) — The requirement that securities brokers must have equity/charter capital of at least VND800 billion (US$36.7 million) to be eligible to provide intra-day trading services is troubling small brokers who are afraid of losing customers to the big ones.

A draft circular, which is prepared to replace Circular No 74/2011-TT-BTC dated June 1, 2011, on the guidelines of securities trading, will allow investors to buy and sell a single share listing in the same trading day (intra-day trading).

However, the draft also stipulates strict conditions for securities companies who are permitted to provide this service.

The broker company must have equity capital or charter capital of VND800 billion; full appropriate reserves to hedge share declines; and a working capital ratio of at least 220 per cent in the last 12 months.

Also, it must not have incurred losses in the previous two years.

The companies must also not have undergone any process related to mergers, consolidation or dissolution or have been placed under control, special control status or suspension by a competent authority.

Under these conditions, there are about 15 companies qualified to provide this service. Leaders of small brokers are raising concerns about losing clients to bigger ones if they are not permitted to offer the intra-day trading service.

The big 15 occupy about 80 per cent of brokerage market shares. However, about 80 other brokers are at risk of losing the remaining 20 per cent of market shares if their customers flee.

At a recent meeting of the Vietnam Association of Securities Business, Hoang Hai Anh, chairwoman cum CEO of PetroVietnam Securities Inc (PSI), said the draft should give priority to risk management of companies rather than equity/charter capital condition.

She suggested removing the equity/charter capital requirement and focusing on conditions of financial safety standards and financial statements.

Phan Quoc Huynh, deputy chairman of the association, said the State Securities Commission could make regulations that allowed securities businesses to support each other to implement intra-day trading.

"Banks also need merger and acquisition to raise capital, let alone securities brokers," Huynh said in the meeting.

The State Securities Commission is collecting opinions from market participants regarding the draft. — VNS

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