Legal regulations on commodity exchanges under Vietnamese law

inherently familiar. The formation of Commodity Exchanges is in line with the law of commercial development in the world because since the 18th century, in Japan, there has been a concentrated commodity trading activity at a center called the Commodity Exchange and an important milestone was the birth of the Chicago Commodity Exchange in 1848. The main initial trading product of this exchange was grain. Close to our country's economy is China, and this country has established the Dalian agricultural exchange since 1993, the main traded items are corn, soybeans, soy milk, barley palm oil... and up to now, this exchange is still operating effectively and increasingly profitable. While in other countries, the form of trading activities through Commodity Exchanges has developed rapidly, in Vietnam, it has been nearly 10 years since the first Exchange was born, but Commodity Exchanges are still struggling to find a suitable operating model. The reason for the birth and "disappearance" of Commodity Exchanges in Vietnam is probably one of the biggest reasons is the legal framework for Commodity Exchanges in general, both in terms of structure and organization as well as human resources, which still shows certain limitations.

First: About the form of the Commodity Exchange

Commodity Exchange is a legal entity established and operating in the form of a limited liability company and a joint stock company. The question is whether it is unfair to other types of enterprises? According to the provisions of the Enterprise Law, in addition to limited liability companies and joint stock companies, in Vietnam there are also forms of partnerships, private enterprises, etc. Therefore, to ensure equality, it is necessary to stipulate that all types of enterprises that meet the conditions for establishing a Commodity Exchange are allowed to be established, not only the two types of enterprises mentioned above have the right to establish a Commodity Exchange.

Second: Article 21 of Decree 158 stipulates that "business members have the right to conduct self-trading activities or receive entrustment to buy and sell goods through the Commodity Exchange for customers". Thus, when buying and selling goods through the exchange for themselves, business members become investors and become customers placing orders to buy and sell directly at the exchange, while when explaining the term, "customers are organizations and individuals who are not members of the Commodity Exchange, conducting activities of buying and selling goods through the Commodity Exchange through entrustment to business members of the Commodity Exchange" 22. Amendments are needed to ensure consistency in legal regulations.

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Third: In the contract for the purchase and sale of goods through the Commodity Exchange, there are two types: forward contracts and options contracts. In the law on securities and banking, this type of forward contract is also used, however, there is a difference in the way the transaction is carried out. Banking law regulates the purchase and sale of foreign currencies between banks by forward contracts but not through the Exchange. Meanwhile, the law on securities has provisions regulating this type of contract and calls it a futures contract. In our opinion, the concepts and terms used in the section on the purchase and sale of goods through the Exchange in the Commercial Law 2005 need to be amended to conform to international practice [3].

Fourth: In normal commodity trading activities, the broker plays the role of an intermediary to help the buyer and seller understand and reconcile the interests of the parties. When buying and selling goods through the Commodity Exchange, the brokerage member's transaction principle is order matching and is carried out through an intermediary who is a member of the Exchange. Therefore, the person placing the sell order and the person matching the order do not know and do not need to know who they have bought the goods from, and neither does the seller. Therefore, the brokerage member between the seller and the

The buyer in this transaction is unnecessary and meaningless because the current form of transaction at the Commodity Exchange is in the form of centralized order matching. A brokerage member that performs brokerage activities for the seller and the buyer, one of whom is a business member of the Exchange, is also completely unreasonable because according to regulations, business members have the right to conduct the purchase and sale of goods through entrustment.

Fifth: The adjustment of the law is not consistent. Both are members of the Exchange, but the Law gives preferential treatment to brokerage members while business members cannot find any regulations for this member, only the guiding decree has only a few brief ideas that do not fully cover this member. In the regulations on the qualifications of business members, they have both the qualifications of brokers and business members, so the risk for their customers because the "good" contracts will not belong to the customers but the business members carry out self-trading activities.

Sixth: The margin level is one of the factors that determine the existence and success of the Commodity Exchange. According to current law, the minimum level is 5%. Thanks to this margin level, investors choose to buy and sell goods through the Exchange to manage risks as well as seek profits. However, according to the author, it is unreasonable to only stipulate a minimum margin level without stipulating a maximum level, and it is difficult to avoid the situation of "profiteering" by brokers.

Seventh: Some countries have separated the provisions of the law on Commodity Exchanges into a separate Law such as Singapore's "Commodity Exchange Law" Thailand issued a law regulating the establishment of Commodity Exchanges, and China has also separated the Commodity Exchange from the Commercial Law. With a separate law, it is certain that it can regulate all aspects in a synchronous manner.

aspects of the Commodity Exchange such as the agency that supervises and inspects the operation of the Exchange, sanctions imposed on the Exchange, and payment centers when there are violations that cause damage not only to the state but also to participants in the transaction. In Vietnam, within the scope of the Commercial Law, the legal provisions on the Commodity Exchange are still vague, general, have not set sanctions, and lack synchronous regulations despite the existence of a guiding Decree.

3.1. Some suggestions

Chapter 3 PROPOSAL

Commodity trading through the Commodity Exchange is the futures trading, in this market in Vietnam is gradually looking for a suitable operating model, with a policy of encouraging the development of a multi-sector economy and equality between economic sectors, so it is necessary to acknowledge that all economic sectors in society can participate and can establish a Commodity Exchange. Mentioning the activities of the Commodity Exchange seems to be a new field in commercial activities, but in fact it is not new, it is just a change of language. The proof of this is that since 2002, a Commodity Exchange has been established and then a number of exchanges have also been established and especially the proof of this is that when our country did not have any Commodity Exchange, there was a futures contract applied to coffee that had been implemented by Techcombank and Dak Lak Import-Export Investment Company for several years now. When participating in transactions on the London coffee futures market (orders placed through Techcombank, through another broker in London), the Enterprise buys and sells coffee on the international market at the price that the Enterprise is most satisfied with, and the goods are delivered later, at a time agreed upon by both parties. What the parties involved in the transaction pay attention to is that at the time of coffee delivery, whether the price goes up or down, it is still delivered at the matching price. Buying and selling through this Commodity Exchange limits the situation where when the season is good, the fish price is bought at a low price by traders and when the season is bad, traders are forced to lower the price by farmers, causing damage to their business activities. Buying and selling through the exchange is a form of future delivery that has the effect of promoting trade to consume goods in large quantities. The purpose of the activity

The operation of the Commodity Exchange is suitable for the conditions of Vietnam as an agricultural country with high quality and productivity agricultural products, and a major exporter in the world of some items such as: Rice, coffee, pepper, cashew nuts, etc. Although it was established later than other countries in the world, most of our country's Commodity Exchanges have fallen into a deadlock.

Most recently, on October 20, 2010, Trieu Phong Commodity Exchange was established, its headquarters is located in Ward 8, District 5, Ho Chi Minh City and it is expected to come into operation in early 2011. This Exchange has an initial charter capital of 150 billion VND, the main commodities traded at Trieu Phong Commodity Exchange have been licensed by the Ministry of Industry and Trade including coffee, rubber and steel. The structure of this Exchange meets the legal requirements including the Exchange, the Clearing Center and the Goods Inspection and Delivery Center. In order for this Trieu Phong Commodity Exchange to not follow in the footsteps of previously established Commodity Exchanges and to promote the establishment of many Commodity Exchanges in the future, the legal framework for the Exchange needs to be amended and supplemented accordingly.

To ensure the smooth operation of the Commodity Exchange and overcome the limitations of the law as well as the practical operations of the exchange in reality, in addition to creating a complete legal corridor, there must also be a synchronous operation of the Vietnamese economy, with strict management and supervision from state agencies but not "imposition". The state will only play a supervisory role and promote that activity more and more effectively through legal barriers supporting the exchange, through sanctions on transparency in payment and constraints to ensure the qualifications of market participants. All of these factors are done well, we will have an effective Commodity Exchange, over time it will raise its own level of operation to an increasingly larger scale, to achieve the ultimate goal of not only

Solving difficult problems about prices in the agricultural sector in particular and commodities in general, but also a lever to increase trade with the world. Reform in finding an operating model for the Commodity Exchange must first have a standard legal framework and keep pace with the international market. Therefore, the first thing to do is to amend and overcome the limitations that the law still has. The Commodity Exchange cannot operate and develop strongly without a necessary legal framework for the organization and operation of the exchange. The law is a very effective tool that can determine the development of the futures market in each country. The construction and completion of the law on buying and selling goods through the Exchange also comes from the experience of developing Commodity Exchanges in countries around the world.

It should be emphasized that the need to perfect the legal framework for Commodity Exchanges in Vietnam is explained by the limitations of the current legal system on commodity trading through Exchanges and futures markets. Commodity trading through Exchanges is a special type of commodity market, with the participation of many different entities, representing different interest groups. To reconcile the interests of the entities is not simple. The duty of the law is to regulate market relations to ensure their legitimate rights and interests, especially the issue of protecting the interests of investors, business members, brokers, creating transparency in the activities of buying and selling goods through the Commodity Exchange. Therefore, the State must issue a synchronous legal system to regulate the activities of the Commodity Exchange and the trading of goods through the exchange, in order to limit negative phenomena arising in this market and protect the legitimate rights and interests of investors. Specifically, there needs to be synchronous adjustment to avoid phase deviation, and being a member of the Commodity Exchange is a powerful arm to promote the market of trading through the exchange.

The law on it has not yet adjusted the balance. There needs to be additional regulations on the responsibilities, powers, and qualifications of business members and brokerage members, and a review of the rights that the current law has granted to members. Are they reasonable or not? Brokerage members, in addition to the right to broker for customers, also have the right to conduct business on their own. In the law, it is necessary to ensure consistency in regulations, and to amend and supplement the legal framework on Commodity Exchanges in a specific way. Our country has regulations in the 2005 Commercial Law, and Decree 158/2006/NDCP detailing the purchase and sale of goods through Commodity Exchanges. However, this Decree is only general regulations. Recently, Circular 03/2009/BCT has been issued guiding the licensing of establishment and reporting regime of Commodity Exchanges. Thus, there is no legal document detailing the organization and operation of Commodity Exchanges. In some countries, this document has been upgraded to law, so it should be built into a separate Law regulating the Commodity Exchanges of countries such as Korea, Singapore, Thailand, China, Canada... With a separate Law regulating the Commodity Exchange, in China, the trading of goods through this Commodity Exchange was born very early, existed and developed sustainably until today, and the trading activities through this Exchange have contributed significantly to the process of promoting and growing, developing the Chinese economy. In China, there are currently 3 Commodity Futures Exchanges: in Dalian, Shanghai and Guangzhou. The Dalian Commodity Exchange (DCE) was established in 1993, trading in commodities such as corn, soybeans, soy milk, palm oil, barley... currently has more than 200 members participating, of which more than 180 are brokerage members and more than 20 are business members. The number of trading customers is more than 200,000 people, of which more than 10,000 are legal entities and more than 190,000 are individuals. The turnover of the floor in 2008

Legal regulations on commodity exchanges under Vietnamese law - 9

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