Local broker Goldwell Capital Co Ltd and Hong Kong-based First Asia Merchants Bullion Ltd will join forces to shore up the Kingdom’s burgeoning derivatives market amid economic disruption in the regional and global economies propelled by the spread of Covid-19.
A memorandum of understanding (MoU) on “Strategies for Sharing Market Information and Promoting Investor Education” was virtually penned to this effect on March 17 by Securities and Exchange Regulator of Cambodia (SERC) director-general Sou Socheat, SERC said in a press release.
Derivatives are financial securities tied to underlying assets. Common assets include commodities, currencies, stocks and bonds. An investor can purchase contracts and their return is based on the market fluctuations of the asset.
The MoU noted that it is designed to prop up the education, dissemination and sharing of market information among investors and improve the quality of services provided by both firms.
The deal will be carried out with a mindset of stability and innovation in line with professional standards to maximise profits made in derivatives trades, it added.
Socheat said at the signing ceremony that the derivatives market had become very vibrant with the number of licensed issuers progressively rising and trading volume logging substantial growth each year.
“With key brokerage-firm players actively directly piling into the market, the issuance of [new] derivatives products in Cambodia is inevitable.
“In this sense, the market will only develop in a fruitful and sustainable manner if players keep building their capabilities and human resources, and become experts that are able to provide professional and accountable services to customers,” he said.
Socheat noted that SERC launched derivatives trading in 2016 with six licensed firms at the time, which has surged to 33 as of end-2020.
The trading volume of the derivatives market rocketed from just $5 million in 2017, to $84 million in 2018, to $200 million in 2019 and topping $600 million last year even as the world grappled with the Covid-19 pandemic, he said.