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Asian Exchanges – The Awakening (Part III): All Change at the Ho Chi Minh Stock Exchange

By Stephan Stadelmann, FINETIK

Published in AsiaMarketsIT.com in Your Say At 01 Sep 2007 15:49:37

Ho Chi Minh Stock Exchange (HOSE) is the new name of HoSTC (Ho Chi Minh Securities Trading Centre), as of August 8 2007. And it is not only the name that has changed. Following the transformation, HOSE is considering plans for its equitisation, and at the same time plans to sell shares to foreign investors.

Continuous Trading, at Last

Also with the transformation comes a flurry of tighter rules and finally the long-postponed introduction of continuous trading. That said, it will be limited to one session, between two end-of-session matching sessions, in contrast to HaSTC (Hanoi Securities Trading Centre), which has been trading continuous matching for a while.

The several previous attempts to introduce continuous matching sessions were not successful because many of the securities brokers were technologically not ready to deal with continuous matching. This inhibitor seems at least partly to have been resolved.

At the same there has been a flood of applications for securities brokerage licences, and if all should be approved by early to mid-next year there would be around 150 securities house in the market (up from about 50 currently), fighting for a piece of the US$30-100 million daily trading volume.

Where as in the US and Europe low latency is the hot topic currently, with companies offering services and products to support financial institutions battling for milliseconds per transaction, in Vietnam brokers still have to shuffle papers before they manually enter trades on the trading floor. At times this means they are missing orders due to time constraints, and they are also inhibited by just the human limit on numbers of orders that can be entered. As a result what can’t be done today will be done tomorrow and investors are kept waiting.

Setting the Scene for a Technology Arms Race

To ensure that HOSE (and HaSTC) can grow and expand in trading volume and system development (Vietnam’s exchanges are expected to capitalise 50 per cent of the country’s GDP by 2010), it has extended its membership qualification to include technological, customer service and other requirements.

This has sparked a technology arms race among the leading securities houses and the new ones, which are dead serious about snatching away a part of the market share of the top five brokers that control around 90 per cent of the 250,000 trading accounts.

Add to this the fact that currently there are only eight empty desks available on the HOSE trading floor, which translates into 24 broker seats. Normally a new broker gets two seats, so there is only room for 12 more firms to join. The number of firms that have been granted in-principal new licences is already much higher than that and many more are still waiting for approval.

HOSE has however confirmed that in early 2008 the trading floor will become obsolete and securities houses will have their trading stations connected directly to the bourse trading systems. That is, for those that are ready.

Filed under: Exchanges, FiNETIK Articles, FIX Connectivity, Library, Market Data, News, Risk Management, Trading Technology, , , ,

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