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Banks raise concerns for a new derivative trading law

The Association of Banks in Cambodia has called on the Securities and Exchange Commission to ensure that over-the-counter derivatives transacted by banks do not fall under the governance of the new draft prakas governing derivatives trading on Cambodia’s stock exchange.

Speaking at a workshop in Phnom Penh yesterday to provide feedback on the prakas, called Licensing and supervision on derivative trading, Charles Vann, deputy director-general of the Association of Banking Cambodia, said derivatives contracts transacted by banks are already regulated by the National Bank of Cambodia.

Van said that his members had “serious concerns” that the new draft law on exchange traded derivatives, in its current state, could be seen to overlap with NBC regulations.

“Derivatives transacted by banks in Cambodia are not securities per se, they do not have the qualities or features of a security which are debt or equity instruments which are negotiable and transferable,” he said, referring to exchange traded derivatives.

“The derivative instrument transacted by the bank are over-the-counter; bilateral transactions as part of the risk management of clients,” he added.

Van asked the SECC to include statements in the new law clarifying that it would not apply to over-the-counter derivatives.

“If such a change is not made, the ABC believes there will be some serious potential impact to the financial sector,” he said.

Van asked that the Banking Association in Cambodia be included in further meetings with the regulatory body regarding the review of the draft law.

Sou Socheat, director general of Securities Exchange and Commissions of Cambodia (SECC), said yesterday that the SECC has been working closely with National Bank of Cambodia to clarify issues relating to the overlap of derivative regulations.

The director general said he would consider the request of the Association of Banks in Cambodia to be involved in higher level discussions.

“The meeting today is to discuss and to gathering ideas. We collected good comments to consider complementing the draft prakas. Once we insert these and make [the parkas] ready, we will propose for approval on the prakas,” he said.

Socheat said he would not put a timeline on when the parkas would be ready for implementation or when the CSX would begin trading derivatives.

“It depends on our preparation. We cannot predict in advance how long or short because some time it’s risky when we do things very fast. So, we need to work carefully,” he said.

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