New stock trading system KRX to operate from May 2

The Ho Chi Minh Stock Exchange (HoSE) on Sunday asked securities companies to prepare to go live with a new trading system provided by the Korea Exchange (KRX) from May 2.

This positive information is expected to support the market's recovery after a gloomy trading week from April 15-19.

In a message to securities companies, the HoSE required securities companies to check their connections to the exchange on April 24 and 25. The end-of-day data will be updated on the new trading system on April 26.

“Securities companies must carry out preparatory work for synchronous implementation,” it said.

On April 30, they will perform a cutover test. The transition date to the system is May 2 based on the last transaction data from April 26. Securities companies need to check the compatibility of their systems with the new system.

On April 30, based on the cutover test results, the HoSE will announce the official operation of the new trading system. If any problems are found, securities companies will continue trading on the current system.

On April 19, the Hanoi Stock Exchange (HNX) announced the implementation of the KRX information technology package. According to the announcement, leaders of the Ministry of Finance at a meeting on April 19 gave instructions on implementing the package with the goal of making the system go live from May 2.

The HNX requested relevant individuals and units to uphold their sense of responsibility and accelerate the package implementation, ensuring timeliness, quality, and efficiency.

The HoSE started the project to upgrade its trading platform in 2012 in partnership with the Korea Exchange. The HNX and the Vietnam Securities Depository and Clearing Corporation (VSD) are two beneficiaries of the upgrade.

This system is expected to bring new life to the stock market as it will have better processing capacity. In the short term, the KRX system will likely only focus on performing basic tasks, ensuring system stability. However, in the long term, when it is fully utilized, it will bring about major changes in the market such as shortening clearing times, intraday trading, and short selling.

Day trading service (T+0) allows investors to buy and sell stocks continuously throughout the day on the underlying stock market (this service only appears on the derivatives market). Short selling enables investors to borrow shares and execute short selling to protect their portfolios or seek profits when stocks are overvalued. This operation is considered an indispensable part of increasing liquidity and the stability of developed stock markets.

The KRX system has more tools for risk management and more products to attract domestic and foreign institutional investors.

It is also an important technical basis for implementing the central counterparty clearing house (CCP) model, helping payment activities between market members take place faster, thus accelerating cash flow turnover in the market.

A basic solution is to remove the pre-funding requirement for foreign investors - one of the two major barriers to upgrading Vietnam's stock market status from "frontier" to "emerging".

Broker VNDirect Securities believes that if KRX goes into operation in the first half of 2024, the Vietnamese stock market may be upgraded to a secondary emerging market by ratings organization FTSE Russell in September 2024.

Vietnam's stock market is under great pressure due to skyrocketing exchange rates and Middle East tensions. It experienced the worst trading week (April 15-19) since the beginning of the year, with the benchmark VN-Index losing more than 100 points to 1,174.85.

Positive information about the KRX system is expected to help the market return to an upward trend in the "great wave of market status upgrade" lasting until 2026.

Viet Dragon Securities (VDSC) predicts that once operational, the KRX is likely to spur a rally in the stock market.