Research Links With Bank Financial Services

freight transport businesses, freight insurance businesses, and freight quality inspection businesses. The growth rate of freight derivatives trading will depend largely on the development of the surrounding environment, including the development of companies in the above fields. Freight transport businesses with a good transport system, good drivers, and good facilities will help goods to be well preserved during transportation and safe during transportation. Freight transport businesses with good financial status can be flexible in negotiating freight rates and payment times. Similarly, reputable insurance businesses will create peace of mind when goods are insured, and the reputation of the freight quality inspection business will help with quick quality assessment and confirmation of the quality of goods.

For these businesses to develop, there needs to be a good business environment, a transparent legal system, appropriate policies and development strategies, good human resources, and the businesses themselves must have a good financial situation and company development strategy. Therefore, there needs to be a policy to synchronously develop businesses in related fields to help the commodity derivatives market develop completely. In addition to the efforts of the businesses themselves, the support of commodity exchanges and transaction management agencies is very important. This support is provided through providing information, training support, organizing seminars, and updating new knowledge for potential businesses. Consulting support on accounting for transactions, financial reporting, and tax obligations to the state of businesses participating in non-financial commodity derivatives transactions also needs attention.

Trading non-financial commodity derivatives is also a very risky transaction if investors do not understand how to trade, do not analyze market price fluctuations well, do not correctly identify market trends, do not have complete and accurate information or do not combine transactions on the traditional commodity market with derivative transactions or do not combine derivative transactions together to form good business strategies. Therefore, the commodity exchange

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There is also a need for risk management solutions for non-financial commodity derivatives to attract market attention. These must include solutions such as investor consulting, investor training, experience sharing, solution sharing, providing accurate and up-to-date information, and most importantly, having a full range of diverse products to ensure that investors are able to combine investment strategies or insurance against commodity price fluctuations in a reasonable manner.

3.1.4 Design suitable commodity derivative products

W4 from SWOT analysis shows that the ability to participate in trading is still limited due to many reasons, one of the main reasons is that the commodity derivative products have not been designed to suit the selected segment. A major problem of the Vietnamese commodity exchange is low liquidity, specifically the number of participants and transaction value is not much. There are many reasons, but one of the main reasons is that the potential demand side has not or cannot access the current products, or the current products do not meet the requirements.

The design of derivative products needs to consider ensuring the interests of the participants: the supply side needs to make a profit from price differences, fees or margin or self-trading value, but basically from price differences and fees and margin; the demand side is willing to pay fees and margin to the supply side to be insured against price fluctuations or have investment opportunities. A suitable product must basically meet the needs and interests of the parties. The problem is of course that the more participants in the transaction, the lower the cost of participating in the transaction, so the designed products after determining the right market segment according to the strategy must be popular to attract participants. These products should be as close to the products on foreign exchanges as possible, especially the standard of goods to create a ready basis for integration and development.

In each commodity derivative transaction, the participants have different purposes, so the designed products must be highly suitable. For commodity futures, the buyer of commodity futures wants to buy the goods he needs at a pre-agreed price because he is afraid of the price of the goods increasing. Meanwhile, the seller of commodity futures wants to

want to sell their goods at a pre-agreed price because they are afraid of falling prices. And this is a decentralized transaction, meaning that the buyer and seller directly negotiate the purchase and sale and there is no common standard for the transaction contract. So when trading commodity futures, the product to be bought and sold must be suitable to the needs of the partner, must understand the partner's psychology is only to insure against the risk of commodity price fluctuations and must see that there is always a risk that on the due date the partner cannot buy or sell the goods as agreed, so when conducting the transaction, there must be accompanying operations to limit this risk. Another risk is that because goods are not traded centrally, there are no common standards for goods, so when conducting the transaction, the parties need to carefully negotiate the quality of the goods. The quantity and term of the transaction must be based on the actual seasonal situation and the natural characteristics of the goods. Specifically, the term in commodity futures trading must be consistent with the harvest and processing time (if any) of each type of commodity, and the price of futures trading must be based on spot prices and expectations of commodity price fluctuations.

In commodity options trading, the buyer of a put option is willing to pay a premium to the seller of the put option for the right to sell or not to sell on the expiration date. Thus, the buyer of a put option wants to sell the commodity at the agreed price because he is afraid that the commodity price will decrease, but if the commodity price does not decrease but increases higher than the agreed price, the buyer of a put option will not sell the commodity according to the option contract but will sell the commodity at the spot price of the market. Similarly, the buyer of a call option is willing to pay an option premium to the seller of a call option for the right to buy or not to buy a certain quantity of commodity at the agreed price. Thus, the buyer of a call option wants to buy the commodity at the agreed price because he is afraid that the commodity price will increase, but if the commodity price does not increase but decreases lower than the agreed price, the buyer of a call option will not buy the commodity according to the signed option contract but will buy the commodity on the spot market at the spot price. It can be easily seen that unlike commodity futures trading, in commodity options trading, the buyer is willing to pay a premium for the right to buy or not buy, sell or not sell on the expiration date. That is, in addition to the need for volatility insurance

In addition to the commodity price, the buyer of a commodity option also wants to have the opportunity to speculate on the price increase or decrease. Another point to note is that commodity options trading can be done centrally or decentralized. Therefore, in centralized commodity options trading, all factors related to the trading contract need to be standardized, the price and premium of the option transaction must be consistent with the expectation of commodity price fluctuations. Similar to futures trading, the trading terms in commodity options must also be consistent with the time of harvest or production of the commodity.

For commodity futures trading, this is a centralized transaction at the exchange, so all factors related to the transaction contract must be standardized. The design of this product needs to pay the most attention to the contract size to suit the majority of suppliers in Vietnam, the required margin ratio and additional margin. The majority of participants in commodity futures trading are for speculative purposes, that is, they do not really need to insure against price fluctuations. Therefore, if the manager allows this transaction, the designed product must target the speculative segment of the market, not the real commodity holders. The important point to be able to successfully develop this transaction is to create excitement in the market, the more people participate in the market, the more the transaction will develop. Commodity futures products therefore need to be designed appropriately in terms of the quantity of each transaction lot, the initial margin ratio is as low as possible, the maintenance margin ratio also needs to be regulated just enough to cut losses and liquidate ongoing contracts. The trading method must be really convenient and in many different ways such as direct trading, via the internet, via phone or other electronic channels. Because it is mainly a speculative product, the price jump and the percentage of increase or decrease in price each day depend on the management policy of the state. The goods in this transaction can be diversified to the maximum. Trading products need to be updated, supplemented and adjusted regularly according to the actual requirements of the market.

Another point that needs to be noted is that depending on the market manager's point of view, the products should be designed appropriately, specifically whether the manager agrees and encourages speculative activities in commodity derivatives transactions or only applies them.

Use these transactions for subjects with real buying and selling needs, that is, to insure against price fluctuations and design products that are truly suitable. The general principle is that the higher the speculative factor, the more accessible the commodity derivative products need to be designed to attract as many participants as possible. The next thing to note is that determining the transaction price in commodity derivative products must absolutely follow international practice, be public and transparent. This is a difficult and highly decisive point in commodity derivative transactions. Investors may not only participate in a single commodity derivative transaction but can combine derivative products to form an investment strategy. Therefore, to ensure development, market organizers need a professional research department, putting themselves in the position of investors to design products that investors need. It is very difficult to introduce completely new products for testing, so a suitable solution is to learn from experience and research to apply current products in the world with the condition that the product is suitable for Vietnam's conditions. Only then will the market be more vibrant, more diverse and will certainly develop. The final note is that commodity derivatives must truly suit market needs, this is the foundation for sustainable development, in the end, the non-financial commodity derivatives trading market in Vietnam must also develop according to the general principles of the development of this type of transaction.

3.1.5 Research on linkages with banking financial services

T5 from SWOT analysis shows that building simple and easy-to-use derivative products is one of the main challenges in developing non-financial commodity derivatives trading. There are many solutions to solve this challenge, one of which is to link non-financial commodity derivatives products with existing products of banks. Initial observations show that the supply side of commodity derivatives products may have good products and can meet the demand for price fluctuation risk insurance, but if only providing commodity derivatives products alone, the possibility of success will not be high. The demand side needs a comprehensive solution package from the definition

cultivation direction, from consulting on new varieties, new farming techniques, from the need for capital advance for planting, advance payment before actual sale and finally ensuring output at reasonable prices.

To meet such needs, the commodity exchange needs to have a policy of linking with many related units. Linking with biotechnology departments to research on varieties and cultivation techniques. Linking with industry associations to provide information on goods, commodity prices, and advanced trading methods. And most of all, linking with banks to meet the financial needs of the demand side. Implementing this synchronous solution is not easy, but it is thought that if all of these needs of the demand side are not met, the commodity derivatives market will be very difficult to succeed because although the price is forced and the price is not guaranteed in traditional transactions, it has become a habit of the majority of people who have goods and above all, they often have a bad financial situation. And when that happens, even if the commodity derivative product is appropriately designed, the market liquidity will certainly be very poor, which will have a negative impact on convincing potential demand sides to participate in the market. The association also has many advantages such as reducing transaction costs compared to retail transactions, supporting the development of related parties. Implementing this combination well is a big step forward in the development solutions of non-financial commodity derivatives.

Providing product packages can be considered a key solution to develop non-financial commodity derivatives in Vietnam in the coming time. That is the provision of customer services at all stages related to the pre- and post-production cycle, combining credit, trading, payment and commodity price risk insurance. Banks have provided product packages to their customers instead of providing individual services to maximize benefits for their customers. Typically, Asia Commercial Joint Stock Bank (ACB) is currently implementing the program "Product Package for Corporate Customers" focusing on small and medium-sized corporate customers, including private enterprises, to strengthen the relationship between ACB and customers. The more ACB products and services customers use, the more they will enjoy.

ACB's incentives. As products in the non-financial commodity derivatives market develop, the commercial banking system should proactively cooperate with commodity exchanges to combine banking products with commodity derivatives products to provide the best benefits and diverse options for investors. With the current economic structure of Vietnam, the majority of enterprises are small and medium-sized. It is very difficult for a small and medium-sized enterprise to open its own risk management department due to limitations in risk management capacity, human resources and costs. Therefore, providing a product package including traditional products along with new products to insure against commodity price fluctuations for enterprises in need is completely feasible.

These products are considered as supporting products for customers, initially helping businesses to get acquainted with and discover the benefits of commodity derivative products. Some typical product packages after combination may include: 1. Commodity derivative products, 2. Issuing and paying L/C, 3. Financing capital for deposit and payment of L/C, 4. Providing foreign exchange for payment of L/C, 5. Foreign exchange risk management services using derivative instruments, 6. Consulting services on foreign trade, foreign exchange and international payment, 7. Warehouse management services, 8. Banks associated with and providing additional insurance and transportation services. This product package has combined the bank's own capital products with financial derivative products and commodity derivative products. The benefit to the customer is that they save a significant amount of time and money when using the service package because the bank can charge at wholesale prices. The benefit to the bank is that the bank's position has been raised to a new level in its relationship with the customer. The bank's position with this product package is that of a financial manager for the customer and through that, it will maximize the benefit to the bank. When developing this product package, the bank must put the customer's interests first and then the profit. The bank acts as a consultant on the benefits of the derivative product and encourages customers to use it, but its use must clearly show the effectiveness between the customer's costs and the results obtained.

3.1.6 Diversify transaction forms

W4 from SWOT analysis shows that the limited ability to participate in transactions is one of the weaknesses in the development of non-financial commodity derivatives trading. To overcome this weakness, diversifying the forms of trading is very necessary. Establishing a centralized trading center at a specific location while the underlying goods are scattered in many places is very difficult and can be a huge barrier to the development of commodity derivatives. If an investor living far away wants to participate in trading, there will be a lot of costs and risks in the transportation process. An investor with many goods also has problems with transporting goods once or many times. The assessment of the quality of goods at the trading center also causes problems if the goods have been brought to the center but the quality of the goods does not meet the requirements. This obstacle becomes more difficult to solve than the supplier of goods can solve the above problems by selling goods to traders. Traders are willing to come to the place, buy goods directly from the garden, pay immediately, even pay in advance, the quality of goods and prices are agreed upon right at the place of planting or production. Seeing this problem, we see the necessity of diversifying transaction forms to satisfy the demand side, then we can develop commodity derivatives trading.

This problem can only be completely solved when the development orientation of commodity derivatives trading in Vietnam is clearly defined. Because then it will be determined specifically which products are traded and which market segments are focused on, from which there will be appropriate forms for potential customers of the market. Transactions can be directly between buyers and sellers at a non-centralized location, or transactions can be directly between buyers and sellers at a centralized location, in which case there should be many transaction points to facilitate movement. Centralized transaction locations in this case also provide information to help buyers and sellers trade conveniently. In the case of centralized transactions, buyers and sellers do not trade directly with each other but trade through the exchange. Therefore, in this case, there should be many forms for buyers and sellers to place their orders.

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