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The Ho Chi Minh City Stock Exchange (HOSE) has officially ruled on the ongoing system overload and solutions with many notable points.
1. System overload on the HOSE occurred in the past due to what reasons?
Since December 2020, in some HOSE trading sessions, it has been recorded that some securities companies (securities companies), especially those with many clients, are unable to send orders to the HOSE trading system during highly liquid sessions. This situation occurred when there was a sudden increase in the number of orders from securities companies that went public. According to HOSE statistics, the number of new securities trading accounts and the trading value has increased dramatically. Consequently, in the top 20 securities companies, the number of orders that entered the floor increased at least more than 3 times, an average of 5-6 times, in particular, there were some companies whose number of orders increased from 13 to 18 times. The number of orders entered in many sessions exceeded the design capacity of the system, causing a system overload.
2. What is the transaction processing capacity of the HOSE system?
HOSE’s trading system has a designed capacity of 900,000 orders. Operating under the uniform allocation mechanism to securities companies, in which: the system automatically spends 20% on reserve orders. The remaining 80% is distributed to securities companies in 2 rounds. In the first round, each company is evenly distributed around 3,000 orders (broker-dealers are divided equally, even those that have ceased operations). In Round 2, the order size will be assigned based on the number of orders in the past for each company and the entire market. This allocation method is intended to optimize operating system resources. Order allocation is based on actual usage data to avoid a sudden increase in the number of orders as a result of a system error of a particular securities company, which can cause the system to fail. The rules for assigning trade orders are the design and availability of the system. The HOSE is currently not intervening to change.
3. Why are some inverters still able to place normal orders when the system overload occurs?
With an evenly distributed mechanism for each securities company, around 3000 orders from the beginning of the day, so when system overload occurs in some large securities companies, in some smaller securities companies, investors can still place orders. Normal transactions because these securities companies have I do not use all the assigned orders.
4. What specific solutions does HOSE have to deal with system overload?
HOSE has increased the trading lot from 10 to 100 shares since January 4, 2021 to reduce the number of orders entering the system. This solution has contributed to reducing the load of a part of the order to the system, helping to increase liquidity by 15-18% as expected. On March 3, 2021, the State Securities Commission also issued documents guiding HOSE, the Hanoi Stock Exchange and the Vietnam Securities Depositary on the transfer of listed shares from HOSE to the Hanoi Stock Exchange. Consequently, publicly traded companies wishing to transfer HOSE’s listed shares to the Hanoi Stock Exchange will be supported to the fullest extent possible by related units.
5. After the implementation of raising the commercial lot from 10 to 100, the market is still overloaded, is this solution ineffective?
The solution to increase trading lots by 100 shares is one of the solutions that HOSE has proposed to regulators, in order to reduce the number of orders entering the system. This solution has contributed to reducing the load of a part of the order to the system, helping to increase liquidity by 15-18% as expected. However, the phenomenon of system overload has not been fully managed, especially during sessions with very high liquidity reaching VND 15-16 billion.
6. Does HOSE monitor and supervise some trading securities companies that use robots (algorithmic trading) to place orders?
Some securities companies modify the system giving rise to errors that affect the system, what solution does HOSE have for this problem? HOSE briefed SSC for meetings and reminded and advised securities companies not to use robot ordering solution in this period to reduce system load. This solution requires knowledge and cooperation of the member securities companies. HOSE oversees the change process of the securities company system. In the event of detecting the risk that the securities society system destabilizes the HOSE system, preventive measures will be taken, including temporary disconnection from the securities society. Securities companies want to change the functions of the trading system, change the structure of the IT system for online transactions, change the solution providers, change the location of connection online transactions, they must report and be approved by HOSE .
7. How has HOSE implemented the SSC instructions on the HOSE stock exchange to HNX?
HOSE has publicly announced information to the entire market, providing information for publicly traded companies and companies preparing to go public in a mechanism to encourage publicly traded companies to voluntarily transfer shares to HNX. This is a temporary mechanism to reduce the load on the system.
HOSE and related units HNX and VSD have agreed on the process of coordinating the implementation of the transfer of shares of the companies that wish to carry out the transfer. HOSE will create the maximum conditions for companies to make the transaction faster. For the new listing documents, HOSE will clearly explain to companies with the current overhead that their shares will be temporarily traded on the HNX.
8. What procedures must a publicly traded company follow when transferring shares from HOSE to HNX?
First, when there is a resolution of the Board of Directors or the General Shareholders’ Meeting, the company must disclose information in accordance with the regulations. The profile is very simple: 1) Transfer transaction request that clearly indicates the expected date of suspension in HOSE; 2) The resolution of the Board of Directors or the General Shareholders’ Meeting that approves the transaction through HNX. The maximum time to process the files is 03 business days from the date of receipt of the complete and valid files. The time to stop trading and change the quote from HOSE to HNX is at least 4 days.
9. Does the trading of HOSE shares to HNX affect the indices calculated by HOSE?
If so, what is the effect? In accordance with the principle of the index, HOSE will remove the traded shares from the indices and place the reserve shares in the index. Trading stocks in indices will greatly affect ETFs that are built and traded on investment indices calculated by HOSE, specifically: it increases the fund’s operating costs. Therefore, to limit the disruption, the SSC has directed Official Letter 713 / UBCK-PTTT not to temporarily consider trading shares in the VN30 index. The publicly traded shares of the VNX50 will not be affected. But for stocks in the VN100, VNDiamond and VNFinLead indices when transacting with HNX, the funds may have to undergo a corresponding portfolio restructuring. Fund portfolio restructuring may indirectly affect the market price of shares.
10. If the company changes the supported floor temporarily, then when you want to come back, will it be faster support?
And if he returns to HOSE, what will companies have to do? As soon as HOSE’s trading system is clear, HOSE will inform the SSC and announce the information on when the shares transferable to HOSE will be received.
11. HOSE and FPT have started to build a temporary transaction system to deal with the system overload, how is this project being implemented?
HOSE is cooperating with FPT in the implementation of the guidance of the Ministry of Finance and the SSC to create a solution to reduce the current situation of HOSE overload. This is the solution that uses the trading system software that is used in HNX and will be implemented in the HOSE infrastructure to replace the HOSE matching order system. This solution minimizes the impact and changes in the securities companies system. The goal is for the system to be able to process between 3,000,000 and 5,000,000 orders per day. This is the optimal solution due to implementation time as well as risks from a system perspective. According to the FPT survey, analysis and evaluation, the expected time to implement the system is approximately 3-4 months.
12. Currently, the statistics of the orders placed, the number of orders processed from the HOSE system are provided differently, what does HOSE have about this?
HOSE implements the full disclosure of information in accordance with the law through the means that is the HOSE website. Information on business hours and statistics are published in full by HOSE on the website. Currently, there are many organizations and individuals who use different technologies to collect information from different sources themselves to build their data sets, but due to insufficient information, deviation can occur. Therefore, HOSE recommends investors and market stakeholders to monitor and update information from official sources to obtain accurate and timely data.
