I. Introduction
The securities market in Cambodia officially started operating at the beginning of 2010, with the Cambodia Securities Exchange (CSX) managing the trading platform, clearing and settlement operations, and securities depository facilities. As of May 2020, the Securities and Exchange Regulator of Cambodia has issued the Prakas No 005/20 on the Amendment on the Prakas No 004/15 SERC/PK dated July 02, 2015, on the Licensing and Management of Derivative Instrument Trading “The new Prakas”. The new Prakas amended on the duration of the license, registered capital for the derivative broker and fee for application and license.
With reference to Prakas No. 004/15, SERC/ PK dated July 2, 2015 on the licensing and the supervision of derivative instrument trading, a derivative instrument refers to a contract between two parties in which the contract’s value is determined by the fluctuation in value of an underlying asset, such as equity securities, debt securities, currencies and commodities, including crude oil, gold, natural gas, as well as principal protected notes (PPN).
This kind of securities instrument allows sophisticated investors to hedge their positions as well as to, trade, on fluctuations in exchange, interest, or price of specific or other underlying assets.
A central counterparty clearinghouse (CCP) is a corporate entity that reduces counterparty, operational, settlement, market, legal and default risks for traders. A CCP becomes the counterparty to the buyer and the seller, and guarantees the terms of a trade, even if one party defaults on the agreement.
The Director General of SERC reviews and grants two years licenses, to applicant companies fulfilling legal requirements. And the renewable license is valid for 3 years. At the same time, licensed securities firms are able to apply for authorization from the Director General of the SERC, if they wish to conduct additional business, such as that of a CCP. They are, however, required to implement additional measures, such as the erection of a Chinese wall, between their securities trading and the CCP business.
A CCP must abide by leverage, lot, maximum/ minimum trade size, spread, pip, initial margin, margin calls and liquidated margins as determined by the SERC.
A Derivative Broker is a company that conducts a derivative brokerage business. The Director General of SERC reviews applications and grants licenses only to those companies fulfilling all the legal requirements. The license for Derivative Broker is valid for two (2) years and is subjected to renewal. The renewal license is valid for 3 years. However, licensed securities can apply for authorization from the Director General of SERC, if they wish to conduct an additional business as that of Derivative Broker, by properly respecting additional requirements, such as erecting a Chinese wall, between the securities business and the derivative brokerage business.
A Derivative Representative is a natural person, licensed by SERC, and authorized to open and manage client’s accounts, and provide other services, in the name of a Derivative Broker.
Anyone wishing to become a Derivative Representative is required to have gained an adequate level of education and business experience, participated in applicable training courses, and have passed the relevant exams organized by SERC.
Any person applying for a derivative representative license must submit an acceptance letter, from a Derivative Broker.
The Director General of SERC reviews and grants licenses only to those persons fulfilling all the requirements set out in the relevant laws and regulations.
- License application fee: 100,000 KHR (approx. $50 USD)
- License fee for two (2) years: 400,000 KHR (approx. $100 USD)
- Renewal license for three (3) years: 600,000 KHR (approx. $150 USD)
| Relevant Requirement / Validity | Central Counterparty | Derivative Broker |
| Minimum Capital |
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| Net Capital |
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| Security Bond |
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| Related Fee and License validity |
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| Related Fee and License validity |
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Securities firms applying for authorization to conduct the CCP business in addition to their securities business license:
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Securities Firms applying for authorization to conduct derivative brokerage business in addition to their securities business license:
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The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations. For more details or any question related to Legal Update on Entry Regulations for Derivative related Business in Cambodia, please contact our professionals via [email protected], [email protected]
TABLE OF CONTENTS
| I. | Introduction |
| II. | Contract for Difference (CFD) as a derivative instrument |
| III. | Licensing on a derivative instrument related business and activities
A. Central Counter party B. Derivative Broker C. Derivative Representative D. Licensing requirement for Central Counterparty and Derivative Broker |
AUTHORS /CO
- Mr. Darwin HEM
- Mr. Thavsothaly TOK
LAW BLOG
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BNG Legal believes expanding access to legal information is crucial to rule of law. To that end, several of our legal professionals write a blog discussing recent developments in the legal landscape.
