Vietnam's Derivatives Market

1. Market Size and Growth

- Since its operation in 2017, the derivatives market has had good, stable
growth
- The market size and liquidity of the VN30 index futures contract grew
strongly at an average of 38.65 percent during 2018-2022. Particularly,
2020 witnessed the highest growth rate of 79.9 percent over 2019
- In the first 7 months of 2023, the average trading volume reached
225,178 contracts/session. This is the second-highest average annual
transaction level after the highest level in 2022.
- As of the end of July 2023, there were more than 1,3 accounts on the
market, 546 times higher than the beginning period
- The derivatives market is also a profitable investment channel for
investors. With two-way trading and being able to buy and sell
continuously during the session, investors can make profits even when
the primary market plummets.
2. The attention of foreign investors.
- The strong growth of the derivatives market has attracted the attention of
foreign investors.
- In July 2023, foreign investors' transactions accounted for 3.47 percent of
the total trading volume in the whole market compared to 0.1 percent at the
end of 2017.
3. Some of the benefits of Vietnam's derivatives market:
 Hedging: Protects businesses and investors from price swings in stocks
and commodities.
 Profit Potential: Allows investors to speculate on future price movements
for potential gains.
 Market Growth: Boosts stock market liquidity and improves price
discovery.
 Financial System Maturation: Signals a more sophisticated financial
system, potentially attracting foreign investment.
Vietnam's derivatives market has limitations compared to the global
market, primarily due to its young age. Here are some key limits:
4. Limitations of Vietnam's derivatives market:
- Product Range: The market offers a limited variety of products compared
to the global scene. Currently, it mainly focuses on stock index futures
contracts, particularly those based on the VN30 Index. This restricts
investment strategies.
- Trading Volume: Trading volumes are significantly lower compared to
the world market. This translates to wider spreads (difference between
buy and sell prices) and potentially less efficient price discovery.
- Investor Base: Participation is primarily from domestic investors. Foreign
investor involvement is still limited. This reduces the overall liquidity and
diversity of the market.
- Regulations: While regulations are evolving, they might still be
considered less stringent compared to developed markets. This could be a
barrier for some foreign investors.