(TIỂU LUẬN) FIN360 GROUP ASSIGNMENT topic understanding the operations of vietnamese stock markets HOSE and HNX

NATIONAL ECONOMICS UNIVERSITY
ADVANCED EDUCATIONAL PROGRAMS

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FIN360
GROUP ASSIGNMENT
Topic: Understanding the operations of Vietnamese stock

markets HOSE and HNX

Instructor
Class
Group
number

Member

: Assoc. Prof. Dr. Dang Tuan Anh
: Advanced Finance 61C
:
4
: 1. Trịnh Khánh Huyền 11192512
2. Vũ Thị Huyền Trâm 11195179
3. Nguyễn Ngọc Linh Đan11196382
4. Nguyễn Bảo Vân - 11195723
5. Vũ Ngọc Anh- 11190605


ABSTRACT

In today's stock market, it can be said that HNX and HOSE are the two largest
stock exchanges in Vietnam. This is also a familiar address for many investors in the
stock market. However, both HNX and HOSE have their own characteristics and
tasks. They complement each other and support each other in their activities and
contribute to providing stockbrokers and stock traders with a reputable platform and
means of exchange and purchase.
Therefore, in order to have a more objective view of the two types of stock
exchanges, this report will show the characteristics and differences between them.

Table of Contents


ABSTRACT....................................................................... 1
Introduction.....................................................................4
1. HNX........................................................................... 4
a. Definition........................................................................4
b. Functions........................................................................4
c. Requirements..................................................................5
2. HOSE.......................................................................... 5
a. Definition.........................................................................5
b. Function:..........................................................................6
c. Requirements...................................................................6
II. Types of order, transaction methods and matching
principles......................................................................... 8
1. Types of order............................................................. 8
a. HOSE..............................................................................8
b. HNX.................................................................................9
III. Trading time and session........................................11
1. HNX.......................................................................... 11
2. HOSE........................................................................ 11

3. Transaction cancellation..........................................12
CONCLUSION.................................................................14


I. Introduction
1. HNX
a. Definition
HNX is the name of the Hanoi Stock Exchange, the abbreviation of the English
phrase "Hanoi Stock Exchange". HNX is a stock exchange for shares of public
companies listed and directly organized and managed by the Hanoi Stock Exchange.
The predecessor of the HNX was the Hanoi Stock Exchange Center, established in
2005. The HNX was established by the decision of the Government, on the basis of
the transformation and reorganization of the Center. Hanoi Stock Exchange, officially
opened in 2009.The HNX operates with the model of a one-member limited liability
company owned by the state, whose representative is the Ministry of Finance. Charter
capital at the time of establishment was 1000 billion VND.
b. Functions
Mobilizing and contributing capital: A place to carry out transactions to buy
stocks and shares of enterprises, helping businesses effectively mobilize capital for
production and business. The idle money is mobilized to promote the development of
the market economy.
Bringing investment opportunities: Instead of saving money in a bank, buying
gold or real estate... Investors can invest in shares on HNX to earn profit and create
effective passive income.
Redistribution of shares: Public company listed shares on HNX, everyone has
the right to buy and become a shareholder. Opportunity to help investors share profits,
dividends, reduce discontent in current income.
The big HNX is a measure of the economy: Stocks listed on the HNX will be
valued by the market. The economy is measured, assessing the level of stability
through the increase - decrease or stability of stock prices.

Funding for projects: Projects lacking capital can be raised by selling securities
(debt escrow). The capital is used to invest and develop projects to help increase the
price of securities to create profits for players.


c. Requirements
● Authorized capital
The amount of charter capital contributed at the time of registration for the
offering is from VND 30 billion or more calculated on the audit report.
● Operating time
The company has operated for at least 01 year in the form of a Joint Stock
Company up to the time of registration for listing.
● Shareholder structure:
The businesses have at least 15% of voting shares held by at least 100
shareholders who are not major shareholders. Regarding the transfer within the
Company, individuals, organizations and major shareholders of the Company must
hold 100% of the shares in the first 6 months and 50% of the shares in the first 6
months. the next month. Shares have been traded on UPCoM for at least 02 years and
approved for listing by the general meeting of shareholders, unless the organization
registering for listing has offered shares to the public or the enterprise is equitized.In
addition, it is necessary to have a registration file for listing shares according to the
regulations of the Hanoi Stock Exchange.
2. HOSE
a. Definition
HOSE stands for Ho Chi Minh City Stock Exchange, established in 07/2000, is
a unit under the State Securities Commission and manages the listed securities trading
system of Vietnam. The stock price index in the trading session of all companies listed
on HOSE is collectively referred to as the VN-Index. Ho Chi Minh City Stock
Exchange operates as a State-owned one-member limited liability company with a
charter capital of 1,000 billion VND. Just like the stock exchanges in the world today,

they often operate in the form of a joint stock company.
b. Function:
The Ho Chi Minh City Stock Exchange is also the formal institution through
which new government bonds are issued and the HOSE functions as a secondary
market for some existing bond issues. All securities listed on the Vietnam Stock
Exchange are denominated in Vietnam Dong (VND).


The State Securities Commission, officially established in 1996, is responsible
for capital market development and issuing securities listing licenses to companies
and operating licenses to securities companies. enforce regulations. To be listed, a
company must be profitable for 2 years continuously, have a charter capital of at least
VND 5 billion and have at least 50 shareholders outside the company, holding at least
20% of the shares. Joint ventures with foreign countries are technically eligible to list,
but in order to be listed on the exchange, these companies must be reorganized into
joint stock companies. Companies that want to be listed must be approved by an
independent auditing company to audit and disclose their financial statements and
prospectus four times in four quarters of the year.
The trading mechanism on the Ho Chi Minh Stock Exchange is an automatic
order-matching system. The capacity of the previous system was about 300,000 orders
per day. The trading price of securities is limited to a daily change of plus/minus 7%
from the previous day's closing price. Particularly on the first listing day of a stock,
only one order-matching session is performed, the trading price is executed with a
margin of plus-minus 20%
c. Requirements
As the largest stock exchange, it is understandable that the listing conditions on the
HOSE are very strict. These conditions include:
 Authorized capital
The value of contributed charter capital up to the time of listing registration
must be at least 120 billion VND based on the most recent audited financial statement.

 Operating time
Companies registering to list shares on HoSE must have at least 2 years of
operation in the form of Joint Stock Company up to the time of listing registration or
Shares of the company have been traded on UpCOM for 2 years or more.
 Business results
The company registered for listing must have made a profitable business for at
least 2 consecutive years prior to the year of registration for listing of shares.
Moreover, the company must have at least 5% return on equity (ROE) at the latest up
to the time of listing registration and not have any debts overdue for more than 1 year.


Beside, there is no accumulated loss in the latest year up to the year of listing
registration in the time corporation working.
 Shareholder structure
There must be at least 20% of the voting shares held by at least 300 non-major
shareholders.
 Transparency
The company registered to list on HoSE must disclose all debts of the members
of the Board of Directors, Supervisory Board, Director/General Director, Deputy
Director/Deputy General Director, Chief Accountant. , major shareholders and related
entities. Futhermore, the business has not committed any illegal acts, prohibited acts
related to accounting or fraudulent financial statements. Last but not least, the
enterprise and its legal representative have not been handled by the law for violating
the prohibitions on securities and stock market activities within the last 2 years up to
the time of registration listing.
 Other conditions
Major shareholders, shareholders being organizations and individuals must
commit to hold 100% of the shares in the first 6 months and 50% of the shares in the
next 6 months, unless the shares are owned by the company. The application file for
listing of shares must satisfy the regulations of the Ho Chi Minh Stock Exchange.

II. Types of order, transaction methods and matching principles
1. Types of order
a. HOSE
There are four types of trading orders:
Limit orders (LO) are orders that are to be matched at a pre-specified price or
better price. Limit orders receive the least priority as compared to other orders.
Moreover, they can be entered into the system in session 1, 2 and 3 and remain
effective until the end of trading day or canceled in the system.
At The Opening (ATO) orders are orders that are to be matched at the opening
price. ATO orders are only effective in the opening periodic order matching session
(session 1). This type of orders receive higher priority than limit orders. Partially-


filled or unmatched ATO orders shall be automatically canceled at the end of the
opening session.
At The Closing (ATC) orders are orders that are to be matched at the closing
price. ATC orders are only effective in the closing periodic order matching session
(session 3). These orders receive higher priority than limit orders. Partially filled or
unmatched ATC orders shall be automatically canceled at the end of the closing
session.
Market price (MP) orders are buying orders at lowest selling price or selling
orders at highest buying price in the market. It is effective in continuous matching
order sessions only. An order to buy or sell a stock at the best available price at the
relevant time.
When a buy order is entered into the trading system, it will be executed
immediately at the lowest available price and the sell order will be executed
immediately at the highest available price. If the quantity of such a market order is not
fully filled, the market order will be the buy order at the next higher price available or
the sell order at the next lower price available. If the quantity of market order is
impossibly filled out because the counterpart orders run out, the buy market order will

become a buy limit order (LO) at the last-traded price and the sell market order will
become a sell limit order at last-traded price.
Moreover, MP order is applied only to continuous order-matching sessions. It
will be canceled if there is no corresponding order at the time of being entered into the
trading system. Compared with an LO order, an MP is executed faster than an LO
order because it is executed immediately after being placed onto the order book.
b. HNX
There are six types of trading orders; in which, there are 2 types including ATO
and LO same as HOSE mentioned above.


Post Limit Order (PLO) is a buy or sell order at closing price in after-hours
trading sessions on HNX. With each stock order, there is a regulation on trading hours,
but with PLO, they can trade after hours so as not to miss other jobs. Thus, trading
PLO orders will help investors be less busy, save time and costs.
Only after-hours PLO orders are entered into the system. PLO orders will not
be entered into the HNX system if the closing price is not calculated during the
continuous order matching session and periodic order matching session. If a counter
order is available, the PLO order is instantly matched. The trading price is equal to the
previous day's closing price. The PLO order is final and cannot be changed or
canceled. Unexecuted or incomplete PLO orders will be immediately withdrawn after
the after-hour session ends.
Market to Limit (MTL) order is submitted as a market order to execute at the
current best market price. If the order is only partially filled, the remainder of the
order is canceled and re-submitted as a limit order.
MTL buy orders will be converted to buy limit orders, with the limit price
equal to the price at which the full portion of the order was filled. The LO price will
be the same as the MTL price if the MTL price is the upper-limit price.
MTL sell orders will be converted to sell limit orders with a limit price that is
lower than the price at which the filled portion of the order was executed. The LO

price will be the same as the MTL price if the MTL price is the lower-limit price.
Market - fill or kill (MOK) order is an order to buy or sell a security that must
be executed immediately in its entirety; otherwise, the entire order is canceled; no
partial fulfillments are allowed.
Market - Fill And Kill (MAK) is an order to buy or sell that can be filled
partially or canceled. The remainder of the order is canceled immediately after the
order is filled.
2. Transaction method
There are two main method:
Automatic Order Matching (AOM) Trading performs the order matching
process according to price-then-time, priority, without human intervention. After


traders of brokerage houses key in buy or sell orders into the securities trading
center’s terminals, the system queues the orders and arranges them according to a
price-then-time priority. Orders are first groupe ik d according to price, with the best
price taking precedence. There are two matching methods: Periodic order matching
and Continuous order matching
Periodic Order Matching: Buy and sell orders are inputted in the trading system
and queued for matching at a specified time at a single price that generates the greatest
trading volumes for that particular stock. This matching method is used to determine
the opening price and closing price of a particular stock.
Continuous Order Matching: The trading system continuously matches the first
buy and sell orders in the queue, and at the same time, confirms each executed
transaction via the member’s terminal.
Put Through (PT) Trading allows brokers to advertise buy or sell interests.
Members negotiate on details of the deals and input in the trading system for approval.
They may then deal directly with each other and prices may be adjusted during the
negotiation. However, the executed price must follow the price range for that
particular stock during the day.

3. Matching principles:
Price Priority states that orders to buy at a higher price will be prioritized,
while orders to sell at a lower price will take precedence.
Time Priority stipulates that for buy or sell orders at the same price, those
entered into the trading system earlier shall take precedence in execution.
III. Trading time and session
HNX and HOSE organize trading from Monday to Friday every week, except
for holidays as regulated in the Law of Labor. Though HNX and HOSE both have two
sessions in the morning and afternoon, break time starts at 11.30 am and ends at 1.00
pm, their trading time and session are different.


1. HNX
Sssion

Trading method

Trading hour

Morning session

Call auction

9-9.15am

Continuous auction I

9.15-11.30am

and put through

Break time
Afternoon session

11.30 am - 1.00 pm
Continuous

order 1.00pm - 2.30pm

matching
Periodical
matching

order 2.30pm - 2.45pm
for

closing

session
Negotiation

1.00 - 3.00pm


2. HOSE

Session
Morning session

Trading method

Trading hour

Continuous auction I

9.15-11.30am

and put through
Break time
Afternoon session

11.30 am - 1.00 pm
Continuous

order 1.00pm - 2.30pm

matching
Periodical
matching

order 2.30pm - 2.45pm
for

closing

session
Negotiation

1.00 - 3.00pm

3. Transaction cancellation
Similar to the trading time and session, HNX and HOSE possess unlike
transaction cancellation.
a. HNX
In case of unconfirmed or not-yet- matched orders, customers are not forbidden
to cancel or modify their orders.
If the representative of the securities company enters the wrong order, the order
can only be corrected if it is approved by the HNX and the investor.
b. HOSE
The rules seem to be more complicated in HOSE. During call auction, it is not
permitted for any customers to cancel or modify orders within the purpose of
determining the opening price and the closing price, which also includes orders
transferred from the continuous call.
However, customers are allowed to cancel during a continuous call if the order
or the remaining order has not been executed, including order or the remaining order
that has not been executed at the previous call or continuous auction.


CONCLUSION
According to the Ministry of Finance, HOSE would focus only on stock market
operations. Meanwhile, the derivatives and bond markets will be controlled by the
HNX. To increase the oversight of listed businesses and security firms and improve
the quality of technology facilities, the two exchanges will become subsidiaries of the
Vietnam Securities Exchange. The stock market is a vast, diversified, and extremely
complicated arena in which assets are purchased and sold, mostly at stock exchanges,
but also at brokerage firms (stock exchange firms) and on the black market. HOSE
and HNX are two of Vietnam's most important stock exchange markets nowadays.
Though they have separated roles and missions, it is undeniable that the two stocks
contribute to the Vietnam security exchange.

REFERENCES

So sánh 2 sở giao dịch chứng khoán phái sinh HOSE và
HNX
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Sở Giao dịch Chứng khoán Thành phố Hồ Chí Minh
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