Ho Chi Minh Stock Exchange continues to struggle with overload

By Phuong Dong   June 13, 2021 | 10:14 pm PT
Ho Chi Minh Stock Exchange continues to struggle with overload
Staff process documents for new investors at a brokerage in Ho Chi Minh City. Photo by VnExpress/Quynh Tran.
Trading on Vietnam’s main bourse, HoSE, has skyrocketed in the last 18 months, overloading its system.

It has been worth more than $1 billion every day this month except on June 1, when HoSE halted trading as the load set off warning signals. This makes the HoSE larger than those of Singapore, Malaysia and the Philippines combined.

In early 2020,before the Covid-19 outbreak, the daily trading value had been only$96 million. This was more than the Philippines’s, but only a 16th of that of Southeast Asian leader Thailand.

According to analysts, liquidity increased steadily since then as a result of local investors moving money from other asset classes into stocks.

By the end of last year, trading on HoSE had risen by 483 percent to be worth a seventh of Thailand’s.

Then, the system began to struggle with the load. Before 2020, it had never once handled more than 170,000 orders in a session. But by the end of that year, the number rose to a dangerous level of 600,000. Now the average per session is 867,000 orders against a maximum capacity for the system of 900,000.

The system was created by Thai experts over 20 years ago, and it cannot be scaled up.

It has been unstable for months, with orders simply getting frozen or being executed very slowly, and stock prices are not displayed, forcing investors to take needless risks.

On June 1 the trading value topped VND21.7 trillion ($935.3 million) in just the morning session. The system sounded a warning, and HoSE was forced to suspend trading in the afternoon to prevent a possible meltdown.

From June 2, it refused to allow traders to cancel or modify orders to prevent overloading, leaving them angry and frustrated.

Recently leading brokerages reallowed the use of the features though some are still enforcing limits during peak trading hours.

A CEO of a foreign-owned brokerage said in the afternoon session, investors still have to wait 5-10 minutes to execute an order, and so by the time it arrives at the central matching system, prices have already changed compared to when they were placed.

Questions have been raised about the State Securities Commission’s (SSC) leadership and vision, especially as HoSE clearly failed to anticipate the increase in load and prepare a backup plan.

Speaking to VnExpress, SSC and HoSE have both claimed they had "backup solutions" but "failed to implement them in time."

However, from a regulatory perspective, the best way to ensure efficiency is to limit reserve capacity to prevent misuse, they claimed.

One HoSE official had this analogy to offer: "No one will use a plane with 200 seats to transport 20 people or build a 10-lane highway and use only two."

Numerous solutions were proposed, from raising the lot size from 10 to 100 and then 1,000 to disallowing cancelation and modification of orders.

Meanwhile, IT giant FPT is building a new trading system that can handle three to five million orders per session and likely to become operational in July. Right now that is the only realistic hope for desperate investors.

The total market capitalization has jumped by 125 percent since the beginning of 2020. On June 9 it was worth $217 billion, or half of Indonesia and Thailand’s.

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