Vietnam overhauls securities market rules to boost foreign investment

Vietnam will strengthen the legal framework for Central Counterparty (CCP) clearing in the securities market, with December 31, 2027 set as the latest deadline for the mechanism’s rollout.

This is included in the government’s Decree 245/2025/ND-CP issued last Thursday, amending and supplementing Decree 155/2020/ND-CP that details the implementation of certain articles of the Law on Securities.

The issuance of the decree is seen as a key step toward attracting foreign capital and mobilizing resources to drive the nation’s economic development.

The Ministry of Finance said one of its major recent efforts, together with the State Securities Commission, has been tackling the removal of prefunding requirements in securities trading for foreign investors.

It has included in Circular 68/2024/TT-BTC dated September 18, 2024 and Circular 18/2025/TT-BTC dated April 26, 2025 provisions allowing foreign legal entities to invest in Vietnam’s securities market to buy shares without having sufficient funds available at the time of order placement.

As reflected in Decree 245, the ministry had reported to the government on new provisions to consolidate the legal framework for the CCP mechanism, including the establishment of a subsidiary to undertake CCP functions.

Specifically, the provisions allow a subsidiary of the Vietnam Securities Depository and Clearing Corporation (VSDC) to carry out clearing and determine payment obligations under the CCP mechanism as assigned by VSDC.

The subsidiary will also allocate 5% of its annual revenue from operations to form a risk prevention fund to manage operational risks - a key safeguard to ensure transactions with insufficient funds are fully settled.

The amended decree further clarifies provisions of some relevant laws, allowing commercial banks and foreign bank branches to participate as clearing members in the cash market.

Custodian banks that are not clearing members can still take part in the CCP system to facilitate margining and securities settlement, ensuring foreign investors’ assets remain safeguarded.

The deadline for implementing the CCP mechanism is December 31, 2027. However, according to the rollout schedule published by the SSC on July 18, 2025, the CCP mechanism for the cash market is expected to be launched earlier, starting in Q1/2027.

Strengthening efforts to attract foreign investors

Decree 245 also adds provisions on documentation for identifying foreign professional investors, aligning with foreign-issued documents and making it easier for foreign investors to participate in private placements and securities issuances.

The period for securities to start trading after a stock exchange approves their listing has been cut to 30 days from 90.

These changes are expected to cut the time to list and trade securities by three to six months compared with current practice, better protecting investors’ interests by allowing earlier market access and increasing the appeal of initial public offerings (IPOs) to both domestic and foreign investors.

Protecting foreign shareholders’ trading rights

Decree 245 removes a provision of Decree 155 that allowed a public company’s shareholders’ meeting or charter to set a maximum foreign ownership ratio below legal or international limits. Public companies that had previously declared such a cap may either maintain it or gradually raise it toward the legal maximum.

Public companies must notify their maximum foreign ownership ratio within 12 months of Decree 245 taking effect. Currently, many have yet to complete the process, so the market does not fully reflect foreign ownership limits.

The amendments aim to better protect foreign shareholders’ rights to buy and sell shares in both the primary and secondary markets, comply with the maximum market access allowed under investment law, and reduce risks for foreign investors in company-specific situations.

Simplifying procedures for issuing trading codes to foreign investors

Under Decree 245, VSDC can now issue ESTC (electronic securities trading code) confirmations to custodian members, who notify foreign investors within one business day of receiving the declaration, without submitting paper documents for an official trading code as previously required.

Under the new rules, foreign investors can trade immediately after receiving the ESTC, in line with international practice.

Allowing foreign fund management firms to receive two trading codes

The amended decree permits these fund managers investing in Vietnam’s stock market to obtain one trading code for the company’s own transactions and another for managing client trades, similar to foreign securities firms investing in Vietnam.

This setup optimizes internal management and monitoring by separating different types of activities (proprietary trading and client trade management) and lays the groundwork for implementing an omnibus trading account (OTA) model in line with international practice.

Enhancing information transparency

Decree 245 introduces several provisions aligned with international practice, such as requiring publicly offered corporate bonds to have a credit rating, while allowing companies to use ratings from reputable international agencies like Moody’s, Standard & Poor’s, and Fitch Ratings.

It also expands the entities eligible to underwrite publicly offered corporate bonds, including not only credit institutions and foreign bank branches, but also foreign financial institutions and international financial organizations.

The decree adds provisions on the responsibility of public companies to pay dividends, revises certain corporate governance rules to limit conflicts of interest, and sets requirements for reporting and disclosure on the use of funds raised from offerings or issuances when the capital is not used for the intended project.

It also amends rules regarding investors’ rights when securities accounts are frozen or trading is prohibited.

These measures aim to enhance transparency in securities and stock market activities and better protect investors’ legal rights and interests.