Derivatives Stock: Need for the determination of the level of risk tolerance

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The seminar.

Enough "mature" to deploy

At the seminar, Mr. Duong Ngoc Tuan, the Deputy Director General of the Vietnam Securities Depository said: After 17 years, the stock market of Vietnam has developed a lot and reached a stable level. This requires a next step in the structure of the market. In which, the derivatives market should be improved in the overall picture of Vietnam stock market in general.

Currently, Vietnam has accumulated resources to deploy the derivatives market to provide opportunities for investors in trading activities. This market can meet many needs of investors participating in the stock market.

"Firstly, there is a need for risk prevention. Secondly, it is speculative trading based on market price fluctuations. Thirdly, through our research, when entering the derivatives market, many financial institutions have better risk-taking tools. Last but not least, the derivatives market helps professional investors diversify their products. Therefore, it is high time for the introduction of derivative securities", Mr. Tuan said.

Specifically, Mrs. Nguyen Vu Thuy Huong - the Director of Capital in Saigon Securities Incorporation (SSI), said that derivative securities can be regarded as the investment tool and the first product. In the normal way, the way to place the seed order is different and the difference is the margin rate of 80-20, 70-30, the investors can sell the property without owning it, and they can close and open the account. With the mechanism “mark to mark” until the end of the day, the investors will know how much loss and interest is, directly in the account.

The problem which investors need to anticipate is that the risk of margin ratio is quite high, which can cause immediate losses. For investors in general, this is both an opportunity and a risk.

Ready for risks

Mr. Nguyen Anh Phong, the Deputy General Director of the HNX commented: "The derivatives market is originally like a forecasting games, having the opportunity to make a profit as well as facing the risk of the wrong forecast.

However, the stock market generally has two sides. The first thing is the liquidity, the product is liquid or not? How to regulate in the case where the liquidity is too high? This is a problem that needs to be studied from the size of the initial market to the price of the product, the margin, etc.

For investors, it is advisable to determine their level of risk tolerance, along with finding out the best trading methods to make an impact.

"As for the Department, we will do all the work necessary to provide timely solutions to limit the maximum risk to investors", Mr Phong said.

Sharing the risk in the derivatives market, the HNX representative said that the mechanism of the derivative market allowed investors to track daily gains and losses, so it was easier to control risk.

On the other hand, transactions in the derivatives market are subject to price difference and if there is a profit or loss, investors will be quick to consider the position.

From another perspective, Mr. Duong Ngoc Tuan said: From the world's major lessons, the regulators might build the system to ensure the safety. After the official deployment, they will continue to monitor and learn from experience.

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In the derivative market, the transaction is executed by the investors but the clearing members must be accountable to the progress. If the investor loses his / her payment, the responsibility will be for the clearing members to take control of this. Also, the investor is a part but the securities company and the clearing members must identify risks to be prepared for the bad scenarios.