The State Securities Commission (SSC) is finalising a revised circular to support the official launch of the KRX system in May 2025, as part of efforts to modernise the securities market.

The draft will soon be submitted to the Ministry of Finance for approval under a fast-track process and is set to update key regulations on registration, depository, clearing, settlement and information disclosure in line with the new system’s digital features.

One major change under the KRX system is how investor information is identified. Instead of using registration numbers and documents, the system will assign each investor a 15-character ID code (SID). To ensure consistency, the draft circular introduces a new definition for 'investor identification information' based on this new method, so all market participants, including depository members and the VSDC, can use it uniformly.

The KRX system will shift all operations fully online, replacing the current mix of paper and electronic processes. The draft circular outlines clear rules for handling digital documents and the roles of depository members to ensure accurate, secure data processing.

It also updates how fractional shares are managed. Instead of returning them to the original trading account, KRX will combine shares from multiple accounts and credit them to a default account created by the system at the issuing organisation. The regulation will be adjusted to support this new method.

Under the KRX system, securities transfers will only be allowed if the original shares still exist, unlike the current system, which allows transfers even after shares are sold. The circular will be updated to reflect this. It will also add rules for foreign institutional investors using non-prefunding transactions, allowing ownership transfers and collateral recovery since the KRX system doesn’t permit trade delays or cancellations due to insufficient funds.

The system also brings major changes to clearing and settlement.

Though Việt Nam hasn’t fully adopted the central counterparty (CCP) model, KRX applies stricter controls, such as blocking delayed payments, enabling automatic stock lending, and removing trades with missing data. A new section in the circular will guide these activities to match the KRX system and help align with global market standards.

The draft circular will update the definition of 'market area' to include both clearing and depository members, in line with the KRX system’s four-zone structure (clearing members, depository members, settlement bank and foreign institutional investors).

Changes will also be made to the clearing support fund.

Instead of limiting loans, the new rules will allow full coverage for any payment shortfalls on settlement day. Recovery will follow a set order: use the defaulting member’s contribution first, then the settlement bank, and finally other members’ contributions if needed. To manage risk, VSDC will be allowed to freeze and sell the defaulting member’s assets and use the money to repay the fund.

Penalties will also be tougher, including possible suspension of trading or clearing rights for late repayments.

The KRX system is a modern, fully digital securities platform set to launch in Việt Nam in May 2025. Developed with support from South Korea’s Korea Exchange, it will replace the current system, offering real-time settlement, automated processing, centralised investor identification, and enhanced risk controls. — BIZHUB/VNS

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