VFCA wants to cut trading during massive sell-off sessions

Investors follow stock trading. Due to the impacts of COVID-19, global stock markets have experienced a number of sell-off sessions, leading many to fall sharply. - Photo kinhtedothi.vn

The VFCA sent a letter to the Prime Minister and the Ministry of Finance on May 6 asking for a mechanism that reduces or disconnects securities transactions during these sessions.

Due to the impacts of COVID-19, global stock markets have experienced a number of sell-off sessions, leading many to fall sharply.

The association said so far this year, the VN-Index had fallen 20 per cent, and experts still estimated a further decline due to the complicated economic situation.

"Although the market has recently recorded some stability, these types of sell-off sessions may occur more frequently,” it said.

Other stock exchanges around the world had applied temporary measures to prevent sell-off sessions and calm investors.

“It is necessary to develop market regulations such as reducing the trading time or even temporarily suspending transactions in sessions when sell-offs occur,” the VFCA said.

It said the VN-Index could drop 30 per cent in the long run, so a mechanism was needed to reduce the fluctuation band on the HoSE from 7 per cent to 2 per cent, and on the HNX from 10 per cent to 3 per cent. The association said such reductions had been applied during previous financial crises.

It also suggested cutting the trading time in the morning session and leaving just one hour for trading in the afternoon session. Currently, the afternoon session lasts 3.5 hours.

If the reduction didn't work, VFCA suggested cancelling trading for 30 minutes if the VN-Index dropped 5 per cent lower than the reference price for three days in a row.

If the VN-Index dropped over 6 per cent price for three days in a row, trading should be stopped for one hour.

In the letter, VFCA also proposed a cut to securities services fees to support and encourage investors.

It also asked for a change to regulations related to foreign investors such as foreign ownership in listed enterprises. The association asked to speed up the process of deploying products serving foreign investors like non-voting depository receipts (NVDR) to help foreign investors increase their stakes in local firms, and accept new electronic settlement methods as well as regulations on money transfers and other payments to boost the liquidity of the stock market.

The VFCA also asked for specific legal provisions to attract FDI enterprises to the local stock market and a legal corridor to promote the liquidity of the corporate bond market.