Thomson Reuters, one of the leading providers of foreign exchange dealing systems to the interbank market has reported a strategic offering with Vietnam’s central bank. The partnership will mean that the State Bank of Vietnam will deploy Thomson Reuters’ solution for enhanced real-time trade monitoring and post-trade systems
The latest offering is a continuation of Thomson Reuters’ commitment to developing viable solutions for Asia’s growing interbank FX market, and since 2013 the firm has been working closely on projects in Singapore, Hong Kong and Nepal.
Alfred Lee, managing director ASEAN, Thomson Reuters commented about the firm’s emphasis on Asia in a statement to Forex Magnates, saying: “This year Thomson Reuters has clearly been at the heart of a number of initiatives across Asia and this momentum will continue going forward.”
Thomson Reuters has been an avid member of Vietnam’s interbank foreign exchange market. Over 60 participants are using the Thomson Reuters Dealing trading platform. Reuters has two representative offices in Vietnam, Hanoi and Ho Chi Minh City. It was the first dealing portal offering dollar to dong trading execution in 1995.
The State Bank of Vietnam will implement Thomson Reuters’ system to collect and extract information in the interbank foreign exchange market. Pham Bao Lam, Director General of Central Banking Department, State Bank of Vietnam summarised the key benefits in a statement to the press: “The implementation of this system marks a positive shift towards automation in managing post-trade foreign exchange information.”
“The ability to access accurate, real-time information will help modernize how the State Bank of Vietnam monitors foreign exchange transactions and increase transparency across the industry as well as promoting the long-term growth of interbank foreign exchange market.”
Vietnam, like many Asian nations has stringent procedures in relation to its treasury management. The State Bank of Vietnam maintains strict currency controls and manages the dong (VND) tightly using a daily fixing and trading band. Through the new system, Vietnam will have the ability to compete with neighbours as it develops its domestic FX market through sound technology and transparent offerings.
“This represents a new era in post-trade transparency, efficiency and automation in the FX market in Vietnam as it becomes one of the few countries in the world to participate in post-trade transparency and reporting in the FX markets,” added Thomson Reuters’ Lee.
Vietnam’s Interbank FX market
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Most transactions in the dong are carried out onshore. Vietnam offers a range of products including:
- Spot and forward FX
- Cross-currency swaps (including VND)
- Structured deposits/investments
According to HSBC’s Emerging Market Currency division (2012): “At present, three foreign banks, two local state-owned banks and six local joint-stock banks are seen as the major players in the market. The market’s volume has increased since the end of 2006 when Vietnam joined the WTO.”
Trading volumes in the dong-denominated market are modest, however through liberal reforms and enhanced trading capabilities Forex Magnates expects trading volumes to increase above $500 million a day in the interbank spot market by mid 2014.
Current average daily trade volume in the spot market is $150 million.
The State Bank of Vietnam has been managing the country’s rate after erratic moves caused instability. The central bank has raised the interbank average exchange rate between the dong and US dollar by 1 per cent in June to stabilise the situation.
Vietnam has embraced e-trading in global financial derivatives through the rapid growth of internet-based offerings. The country saw erratic moves in the real estate markets in the mid 2000’s, and thus investor sentiment shifted to gold and international products.
Several introducing brokers operate in the main cities offering trading services for major brokers including FXCM, Gain Capital and FXDD. According to IronFX’s website and Facebook page, the Cyprus-based broker has an office in Vietnam.
Forex Magnates expects mobile and social trading to be the main drivers of growth in Vietnam’s retail FX and CFD markets. Leading introducing brokers operating in the region include; Maxi-Forex and HoldingFX.