Deploying derivatives in the foreign exchange market - experience from China and development solutions for Vietnam

competitive fees, to initially attract customers, help investors become more familiar with and interested in participating in centralized options trading, playing an active role in developing an official centralized options trading market.

Relevant state agencies, especially the Ministry of Finance, need to coordinate with banks... to initially conduct initial tests to create a market: for foreign currency options, it is possible to choose widely traded foreign currencies such as USD, EUR, JPY... to be able to issue and list options based on them. The issuers of these options are banks or securities companies. Investors and importers and exporters in need will also trade through banks. The supervisory and management agencies, including the foreign exchange management department, will be the ones to decide whether or not to approve these foreign currency options. The Exchange and the Trading Center will also play the role of supervising, managing and publishing transaction information as above.

In short, the establishment of an official centralized options trading floor is a complicated process, requiring the fulfillment of many complex essential conditions, when the decentralized options market has been relatively developed in Vietnam. The topic only briefly outlines the solutions to this problem. The establishment of an official centralized options trading floor will mark a new development step of Vietnam's financial market.

2. On the side of commercial banks

2.1. Banks need to have specific business orientation:

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Commercial banks need to have a reasonable business orientation, balancing goals, market share, reputation and capital safety. Customer policies and marketing activities need to be further promoted to attract customers. In addition to clearly explaining the features and benefits of the product, there must be a reasonable service price policy, still ensuring profits but stimulating customers.

In addition, commercial banks have a strategy to expand their operations to the international market, not only swaps, forwards, and options, but also to other conversion trading services such as futures and options.

2.2. Enhance the reputation of commercial banks in the foreign exchange market:

The reputation of commercial banks is an important factor that makes customers decide to participate in transactions with banks, especially in transactions such as swaps, forwards, and foreign currency options. The reputation of banks makes customers feel secure and safe about risks that may arise. Therefore, to improve their image as well as attract customers to new services, commercial banks need to: Pilot and apply a commercial bank organization model according to international standards, moving towards forming a number of strong financial groups with financial potential in terms of capital as well as other equipment. Organize banking activities in convenient locations, with decent headquarters, good impression, modern equipment, especially the foreign exchange business department. Create a civilized, polite and dedicated service style for customers, while enhancing the sense of responsibility of bank staff to avoid unnecessary errors or confusion.

2.3. Continuously improve the professional qualifications of bank employees:

Commercial banks must have measures to train, educate and fully equip their employees with professional knowledge so that when conducting foreign exchange derivatives operations, they can be flexible and quick, creating trust for customers, and on the other hand, they can also convince, introduce and advise customers to choose these products.

In addition, banks must also focus on developing human resources in the following directions:

- Recruiting young employees and arranging staff according to their strengths and abilities. With the requirement of developing modern technology and operations, staff training combines retraining of existing staff, timely training of new professional knowledge, in-depth training for staff directly involved in derivative foreign exchange swap transactions in parallel with training of management staff.

- Diversify training channels and methods. Strengthen cooperation between universities, domestic and foreign research institutions with central and local ministries, branches...

- Encourage attracting and employing highly qualified foreign exchange experts from organizations and countries in the region and the world to work in Vietnam.

- In addition, it is necessary to equip yourself with knowledge and experience about the foreign exchange market and the international currency market, technical analysis skills, fundamental analysis on the basis of selecting, synthesizing and analyzing information to predict market trends in order to use derivative instruments most effectively. Through that, you can advise, guide and help your customers to better understand the foreign exchange market.

2.4. Fully exploit foreign currency sources, increase foreign exchange reserves:

Commercial banks need to continuously exploit foreign currency sources to continuously supplement foreign currency reserves because if the amount of foreign currency in hand is too thin, commercial banks cannot develop the scale of foreign exchange derivative transactions. Foreign currency sources that can be exploited for commercial banks include: Revenue from import and export of goods and services; foreign currency cash held by residents, annual remittances to Vietnam; foreign currency of branches in the same system and other commercial banks. To fully exploit foreign currency sources, commercial banks need to have policies for each capital source, through interest rates and exchange rates. On the other hand, it is also necessary to increase

The two sides are closely linked together, providing the market with a synchronous way to "cover" and "offset" each other's risks for mutual development.

2.5. Implement reasonable pricing policy for customers:

Price and quality are the two most important factors that determine the choice of currency for customers. Reasonable pricing policy must be flexible for each specific customer group, such as regular customers or customers transacting with the bank for the first time...

It is necessary to approach customers, organize seminars to introduce and advise in order to both raise customers' awareness of exchange rate risks and help customers understand foreign exchange derivatives. Developing derivatives and derivatives markets is to help businesses have more opportunities to choose the type of foreign exchange transaction that suits their business goals.

When using derivative instruments, businesses have the choice of the desired exchange rate. On the other hand, it is necessary to focus on training and fostering for staff directly doing business in the international foreign exchange market on derivative instruments in general and foreign exchange derivatives in particular, because these are new products, complicated in both theory and practical application.

2.6. About means and equipment.

In addition to the existing facilities and equipment of Reuters, Thomson, SowJones News or Metastock, it is necessary to equip additional software for processing, risk management and fee calculation for derivative transactions. Expand cooperation with foreign banks in the international foreign exchange market, to take advantage of support in knowledge, risk management analysis system for derivative instruments in general and foreign exchange options and foreign exchange futures in particular.

IV. RECOMMENDATIONS TO PROMOTE THE DEVELOPMENT OF THE FOREIGN EXCHANGE DERIVATIVES MARKET IN VIETNAM

1. For government agencies:

Laws play an important role in guiding the implementation and promoting the healthy development of the foreign exchange market in general and the foreign exchange derivatives market in particular. Therefore, government agencies should learn from the experience of other countries in terms of regulations and legal decrees, combining the actual conditions of the Vietnamese market to issue reasonable regulations suitable for the development of the market. In addition, government agencies should gradually remove regulations on conditions for participating in business in the interbank foreign exchange market, helping to increase the number and value of transactions in the market. Moreover, government agencies should have a plan to expand the term of foreign exchange swap transactions, helping investors have options to hedge risks in the long term, not stopping at the current 1-year term.

2. For the State Bank:

Although it can be said that in the past, the State Bank has played an important role in managing Vietnam's monetary policy through exchange rates, providing timely support to stabilize economic development, curb inflation and deflation, especially during the recent financial crisis, and providing great support to businesses to avoid financial risks in general and exchange rate risks in particular. However, the policy of anchoring exchange rates with small fluctuation ranges is partly the reason for hindering the development of Vietnam's derivative foreign exchange market. Therefore, it is recommended that the State Bank continue to learn from the experience of managing exchange rates in the market from countries with developed economies in the world, and skillfully apply them to the domestic market situation. In particular, the State Bank needs to build a strong foreign exchange market with full functions such as exchanges and OTC markets.

3. Commercial banks:

Commercial banks are active participants in foreign exchange derivatives trading in the Vietnamese market. Therefore, in order to develop the market, commercial banks need to diversify their foreign exchange trading activities, not just stopping at swaps, forwards or foreign exchange options, but they need to invest in technical equipment to gradually develop futures derivatives to help investors have diverse choices in risk prevention. In addition, commercial banks have a policy of training staff on this type of business because this is the team that contacts customers, explains and persuades them to buy this product. And above all, commercial banks need to use risk prevention tools more actively than ever and must make recommendations to the State Bank to develop the foreign exchange market in general and the foreign exchange derivatives market in particular.

4. Businesses

Foreign exchange derivatives are an effective risk prevention tool for import-export enterprises in Vietnam. Therefore, enterprises need to have a plan to learn and improve their understanding of the above type of business, and use it actively in risk prevention. And above all, enterprises need to build for themselves an internal risk prevention system that operates effectively in assessing exchange rate risks in particular and financial risks in general, which helps enterprises have a clear view and assessment of the risks that enterprises encounter when participating in the foreign exchange derivatives market. Only then can enterprises become active members participating in the foreign exchange derivatives market in Vietnam.

CONCLUDE

For the Vietnamese foreign exchange market to rapidly develop and improve, moving towards integration with regional and world foreign exchange markets, it requires a lot of time and effort not only from the State Bank - the organizer and operator of the market; commercial banks - the main members of the market but also from other entities participating in transactions in this market.

It can be seen that the current activities of the Vietnamese foreign exchange market are very poor and monotonous, the types of transactions are limited, mostly spot transactions, while forward, swap and option transactions are mostly carried out, although these are derivative foreign exchange instruments from spot foreign exchange trading with many important applications in practice. Therefore, through studying the current situation of conducting derivative foreign exchange transactions in the Chinese foreign exchange derivative market, I realized that both markets have things in common: the market is newly established, the number of transactions is still low, legal barriers are still high and people's understanding is still limited. Therefore, from the development of the Chinese foreign exchange derivative market, I boldly propose solutions to overcome the limitations in the Vietnamese foreign exchange derivative market to improve the quality of foreign exchange derivative products, accelerate the integration process with the regional and international financial markets on the basis of the strategic goals of the banking industry in the coming time.

It is hoped that the solutions presented in the thesis are suitable for the reality in Vietnam and show the future development trend of the domestic foreign exchange market, quickly expanding and improving foreign exchange swaps, forwards and options, moving towards implementing foreign exchange futures derivatives, ensuring all 5 types of traditional basic operations in the foreign exchange market, thereby gradually perfecting the market with more diverse and complex business operations.

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