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Increasing the minimum lot to 1,000 shares, according to the HoSE representative, is a solution to reduce the number of small orders entering the system, thus directly reducing the pressure on the processing system.
Speaking to the press recently, Mr. Le Hai Tra, Managing Director of the Ho Chi Minh City Stock Exchange (HoSE), said that the solution to increase the minimum trading lot to 1,000 shares has referred to the practices international and expert opinion. If implemented, this solution will reduce the number of small orders entering the system, thus directly reducing the pressure on the HoSE processing system.
“Developed markets such as Japan, Taiwan, Singapore … have gone through this roadmap. According to calculations, increasing lots to 1,000 can reduce 40% to 50% of the total number of trade orders. Lots too they can pave the way for new heights of market liquidity, “Tra said.
Mr. Le Hai Tra in a recent press response. Picture: Be an optician.
In early 2021, the minimum block of shares was increased from 10 to 100 shares. Mr. Tra said that this solution has proven to be effective, reducing the load of a part of the order in the system, helping to increase liquidity by 15-18%. However, the phenomenon of congestion has not been fully managed, especially in sessions with a very high liquidity that reaches 15,000-16,000 million VND.
Explaining the system congestion, said the HoSE representative, the main reason was due to the sudden increase in HoSE liquidity since late 2020. Many trading sessions were almost 4-5 times higher than the highest level in the past and 6-7 times the level at the beginning of 2020. Securities companies in the top 20 have an increase of at least 3 times the number of entry orders, an average of 5-6 times, 13-18 times.
“The number of orders entering the floor in many sessions exceeded the number of orders designed for the entire system, causing congestion. This is a force majeure situation,” explained Mr. Tra.
The HoSE trading system has a maximum capacity of 900,000 orders per session, operating under the uniform distribution mechanism among securities companies. In which, the system automatically spends 20% on reserve orders, the remaining 80% is divided among the market members.
Initially, the system divided each company evenly around 3,000 orders (securities companies were divided equally, even those that had ceased operations). Then the order size will be divided according to the ratio of the average number of orders entered from the last 30 days.
This allocation is intended to avoid a spike in the event of a systemic failure of a securities firm. It can be seen as a self-protection mechanism and in the current situation, according to Mr. Tra, it has been effective, making the transaction system more secure on a global market level.
The solution to thoroughly address system congestion is to replace it. The HoSE representative said that foreign experts have been present in Vietnam since early December 2020 to roll out the work as planned. Currently, experts are testing the capabilities of hardware devices, installing software, and the HoSE has informed securities companies to prepare test plans.
However, this advance is in favorable conditions. The opening of the new system will continue to depend on many objective conditions, especially the unpredictable risk of the Covid-19 pandemic, which has actually delayed its implementation in 2020.
Minh Son
