VNDirect Securities has selected Horizon Software's platform in preparation to trade futures and warrants on the Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HOSE), which is planned to commence in June and September, respectively.
Horizon's Platform for Automated Trading will enable VNDirect to have first market-mover advantage, to respond quickly to market innovations and to keep pace with new product developments, among other via the introduction of options trading.
Vietnam's upcoming 'covered warrants', which are derivative vanilla put/call warrants (DWs) in nature, will provide a missing link in Vietnam's burgeoning investment market, according to Giang Nguyen Hoang, chief executive of VNDirect.
"Vietnam's stock market has developed for 17 years, but investors can only trade vanilla products," said Hoang. "The benefit of DWs is in leveraging, which is a common investment-enhancing tool, so DWs is one of the types of derivative products that has been widely expected [to be introduced in Vietnam]."
According to Hoang, a number of attractive investment opportunities are not available to Vietnamese investors, including more complex propositions across equities, FX and commodities, and pointed that more complex products are expected to be on regulators' radar, depending on the market condition and level of maturity of the investment landscape in the country.
"One of the challenges facing the market is an absence of good structured products, and a legal frame to offer those kinds of products," Hoang said, noting that there is demand for both protected and unprotected products, as well as for underlyings across asset classes. "However, this is also an opportunity, as investors are hungry for more complex products like DWs, futures and others."
Ekaluck Chaiyaporn (pictured), Asean sales director at Horizon, said that the market is big, with over 100 securities companies, and introducing warrants certainly means opportunities to anyone involved.
"[There are opportunities] for issuers (for spread), brokers (for commissions), exchange (volume), investors (new way to invest) and vendors like Horizon to facilitate the growth behind the scenes," Chaiyaporn said, adding that the company's tools are widely used by the warrants market makers in Thailand, Malaysia and Hong Kong. "The challenges we see are to have in place the right regulatory balance, education and marketing of derivatives products."
Vietnam indexes have achieved strong growth since 2013 and leverage from trading warrants is likely to fit well the appetite of local retail investors, Chaiyaporn noted. "This makes Vietnam the sweet spot for the next development," he said. "We foresee steady development of structured products market in the region. All exchanges are actively playing important role to market these products. The market makers in the region are making competitive tight spreads while also trying to differentiate by diversifying its underlying."
The deal with VNDirect comes after Horizon extended its long-term relationship with Edelweiss International Singapore earlier this year. Horizon will provide Edelweiss' trading teams with access to a comprehensive range of features and the ability to execute sophisticated strategies and workflows.
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