On the morning of May 5, the Ho Chi Minh City Stock Exchange (HoSE) officially launched the long-awaited KRX system, marking a major milestone for Vietnam’s stock market after more than a decade of planning and delays.

KRX is an advanced information technology platform developed by the Korea Exchange (KRX) and invested by HoSE, with an initial capital of approximately VND 900 billion (about USD 35.4 million). The system promises a wide range of new features and is expected to attract more investors, boost market liquidity, and enhance Vietnam’s path toward emerging market status.

Initially funded in 2012, the KRX system was originally set to be operational by 2021 but faced multiple delays. HoSE conducted numerous trial runs in 2024, but recurring issues pushed back the official rollout until now.

Key changes introduced by the KRX system:

1. Changes to ATO/ATC orders:
Under KRX, ATO (at the open) and ATC (at the close) orders will no longer be prioritized over limit orders (LO) already entered into the system. These orders will now display at a defined price level, similar to LO orders, rather than appearing with the “ATO” or “ATC” markers.

2. New order amendment/cancellation rules:
Investors can no longer modify both price and volume in a single update. Changing price or increasing volume resets the order's time priority; decreasing volume does not. As before, ATO and ATC orders cannot be amended or canceled once placed.

3. Replacement of MP with MTL orders:
The market price order (MP) is replaced with market-to-limit (MTL) orders. If an MTL order is only partially matched, the remaining volume is automatically converted to a limit order at a price ±1 tick from the original.

4. Block trades and odd-lot trading:
Both the buyer and seller can now input orders in block trades; one party then confirms. Previously, only sellers could initiate. Executed block trades can no longer be canceled or amended.
Odd-lot orders (under 100 shares) can now be placed throughout the trading session (9:00 AM - 2:45 PM) using LO orders, compared to the limited windows under the old system.

5. Real-time foreign investor room updates:
Foreign ownership limits are now updated immediately upon order entry, rather than after execution as in the previous system.

A catalyst for growth and market upgrade

The KRX system is anticipated to significantly improve market liquidity and resolve previous bottlenecks, such as the congestion experienced in 2020–2021. It also introduces new functionalities and trading models, such as same-day trading (T+0), short selling, and shorter settlement cycles, laying the groundwork for Vietnam’s long-term goal of being upgraded from frontier to emerging market status.

Brokerages forecast that the system could boost average daily trading value on the VN-Index by 30–70% compared to the five-year average. VNDirect estimates the system could increase market liquidity to USD 4 billion per session. Shortening settlement from T+2.5 could also improve capital turnover rates.

In global markets, T+0 trading allows investors to buy and sell the same security multiple times within a day, typically for speculative gains or to mitigate losses. At the end of the day, all positions are offset, so no actual securities delivery is required - only net payments are made.

Short selling, where investors sell shares they don’t own (usually borrowed), is another new feature enabled by the KRX system. Investors profit by selling high and buying back at a lower price, based on forecasts of falling prices.

Market analysts say these innovations could serve as a major boost to the Vietnamese stock market’s development and appeal to global capital. They are also critical prerequisites for FTSE and MSCI to consider Vietnam’s market for an upgrade.

As the system goes live, securities sector stocks are expected to benefit the most from the resulting surge in liquidity.

Manh Ha