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Securities Exchange Commision discusses derivatives rules

Securities Exchange Commision discusses derivatives rules

The Securities Exchange Commission of Cambodia (SECC) officially launched derivatives trading yesterday and held a consultation meeting with financial firms and investors to review a draft prakas on qualified investors in the securities market.

Feedback from the public forum will be used to help formulate regulations to be included in the prakas, which will be issued “soon," said SECC director-general Sou Socheat.

“After announcing [a plan to introduce] derivatives trading, we received many applications,” he said. “Many companies contacted us. Some are qualified and some are not, and all derivatives traders will be required to have a license.”

Derivatives come in many forms, but all are essentially financial contracts between two parties that derive their value from the performance of an underlying asset such as a commodity, index, currency or stock.

The contracts – which include futures, forwards and options – allow parties to hedge risks on a transaction to be conducted at a future date and at a pre-determined price.

According to Vin Pheakday, director of the SECC’s securities intermediaries supervision department, three types of business activities have been approved to trade derivatives in Cambodia: central counterparties, derivative brokers and derivative representatives.

The the minimum capital requirement is 20 billion riel ($5 million) for a central counterparty, which acts as a clearing house to facilitate derivatives trading. The minimum capital requirement for brokers is 1 billion riel ($250,000). Both are required to provide a security bond equivalent to 15 per cent of their capital.

The licence for a company to operate as a central counterparty costs 40 million riel ($10,000) and is valid for one year. The fee is 20 million riel ($5,000) for registered securities firms.

Derivatives broker licensing fees are 10 million riel ($2,500) and 5 million riel ($1,250 million a year for companies and securities firms, respectively. One-year representative licenses for individuals cost 500,000 riel ($125).

This copy corrects an earlier version that confused details of the draft prakas with an earlier document.

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