New stock trading system KRX unable to go-live on May 2: regulator

The State Securities Commission (SSC) has rejected the Ho Chi Minh Stock Exchange’s (HoSE) proposal to officially operate a new stock trading system called KRX on May 2, citing some securities firms as saying that there were errors during the testing process.

“There is not enough basis to approve the HoSE proposal,” the SSC, the local stock market watchdog, said in its urgent document sent to stock exchanges and the Vietnam Securities Depository and Clearing Corporation (VSDC) regarding the implementation of the KRX information technology system, provided by the Korea Exchange (KRX).

According to the regulator, the HoSE had proposed to the commission the official operation of the KRX system without a report from the Ministry of Finance and the Vietnam Stock Exchange (VNX), and without obtaining the opinions of beneficiary units such as the Hanoi Stock Exchange (HNX) and VSDC.

“This failed to comply with legal regulations stated in Clause 26, Article 4, the Securities Law 2019,” it noted.

According to the proposal, the KRX system has not undergone a comprehensive acceptance review involving the investor, the contractor and beneficiary units, failing to ensure compliance with the regulations governing investment management and information technology application using the state budget.

The HoSE report also does not indicate that the KRX system has obtained the required Level 4 information security approval from the relevant authority as per government regulations. “There is the absence of official documentation from members regarding their readiness to connect to the new system and their capability to provide post-connection securities services to investors.”

Previously, the SSC sent a letter instructing the stock exchanges and VSDC to prepare reports and propose solutions regarding the KRX system.

On April 21, the HoSE issued an urgent notification to securities companies regarding a plan for transitioning to the new trading system in preparation for the official implementation on May 2.

It required securities companies to check their connections to the exchange on April 24 and 25. The end-of-day data is set to be updated on the new trading system on April 26.

According to the notification, on April 30, securities firms will perform a cutover test. The transition date to the system is May 2 based on the last transaction data from April 26. They 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, the document wrote.

Securities companies are scheduled to conduct a cutover test by April 30, according to the notification. The trading date on the HoSE system was expected to be May 2, with the transaction data reflecting the end-of-day data on April 26.

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.