Decree drafted to empower SSC to halt market trading


The Ministry of Finance is preparing a decree that allows the State Securities Commission (SSC) to shut the market down temporarily to prevent it from tumbling if any bad news appears and damages market sentiment. — Photo

The State Securities Commission may be authorised to switch the stock market off if it falls too much in the trading day.

The empowerment is a part of the decree the Ministry of Finance is writing to implement the amended Law on Securities, which was passed by the National Assembly on November 26, 2019.

If completed, the decree will give the State Securities Commission (SSC) the full authority to halt the stock market if trading goes berserk.

The temporary shutdown, which is widely used in developed markets such as the US and South Korea, aims to calm the market down if any bad news has a negative impact on the overall sentiment.

In the US markets, if main indices fall as much as 7 per cent, the market will be halted the first time for 15 minutes. If the indices fall by 13 per cent, the market will be halted the second time for 15 minutes. But when the decline reaches 20 per cent, the regulator will close the market for the whole day.

In South Korea, trading is halted for 20 minutes if either the Kospi or Kosdaq – the two main indices – fall 20 per cent from the previous day’s close. The switch-off is activated once a day only.

Amid the prolonged COVID-19 pandemic and rising tensions between world’s largest economies, the global stock markets are becoming more vulnerable and sensitive to bad news.

Since the beginning of the year, the VN-Index has fallen by more than 3 per cent on nine trading days. The worst daily decline year-to-date was recorded on March 9 when the VN-Index tumbled 6.28 per cent.

According to the finance ministry, the market turbulence caused by large-scale sell-off is considered a threat to the security of the equity market. Reasons for such a sell-off may come from bad news of the international markets, the dissolution or insolvency of a company, and changes of regulations.

Aside halting the market, the SSC may also ask stock exchanges to adjust the trading time and change the daily trading limit of stock prices to prevent the market from plunging.

The finance ministry is gathering feedback from securities companies, specialists and State agencies to complete the decree.

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