The Securities and Exchange Regulator of Cambodia (SERC), in collaboration with the International Finance Corporation (IFC), and with the support of the Ministry of Finance of the Government of the Grand Duchy of Luxembourg, organised a two-day workshop on the ‘Derivatives Market’ from May 20-21, 2024.
This workshop was held under the high presidency of H.E. Sou Socheat, Director General of the SERC, and featured the participation of three IFC representatives: Philippe Ahoua, IFC Treasury Capital Markets Senior Advisor; Robert G. Pickel, Chair of the Management Board of the P.R.I.M.E. Finance Foundation and IFC Consulatant; and Nilza Adam, Financial Officer at IFC.
This is the third workshop that the SERC has organised in partnership with the IFC.
Designed to provide insights related to the derivatives market, the two-day workshop covered:
- Types of derivatives;
- Structure and functioning of derivatives markets;
- How derivatives are traded, cleared, and settled;
- Best practices related to laws and regulations in the derivatives market
- Risk management for the derivatives market;
- Derivative pricing and valuation;
- Derivatives and financial innovation;
- Global financial markets.
“The SERC plays a critical role in developing and regulating the derivatives market by ensuring its integrity, transparency, stability, and fairness through 1. overseeing market, 2. developing and implementing rules and regulations, 3. enhancing transparency in trade reporting, 4. protecting market participants and 5. adopting and adapting further regulations," stated Socheat, during his opening remarks.
Our long-term vision is to welcome more investors in the derivatives market, and be able to provide tools for investors to manage risk as well.
What Are Derivatives?
Derivatives are contracts that derive value from an underlying product, such as an asset, index or interest rate. The price of derivatives depend on the underlying asset's fluctuations.
During his speech, the SERC Director General explained that derivatives “are instruments used to hedge risks that will enhance the development of securities markets, financial transactions as well as trade in Cambodia,” with the SERC acting as the regulator of this market due to the fact that derivatives fall under the scope of securities products.
“Therefore, as a regulator, let us embrace this journey with a strong commitment and a long-term vision to building a resilient and vibrant financial future for our next generations,” he added.
What Types Of Derivatives Are Being Traded In Cambodia?
While speaking with B2B Cambodia, Socheat explained that there is currently only one form of derivative being traded in the Cambodian market – Contract for Difference (CFD).
The only type of derivative that we have started trading in Cambodia is the Contract for Difference (CFD). There are other types of contracts that can be formed from underlying assets, such as ‘futures contracts’ or a contract that the banking sector calls a ‘swap’, or an ‘option’. But we cannot launch all these products at the same time, we need time to prepare regulations, we need time to raise awareness on each type of these derivative products, both internally among the regulators, as well as the general public and traders in the market.
The SERC Director General added that the derivatives exchange in Cambodia should be understood as complementary to the Cambodia Securities Exchange (CSX), which has been operating since the Phnom Penh Water Supply Authority completed its initial public offering (IPO) in April 2012.
We launched one derivative product in 2017 called ‘Contract for Differences’ (CFD), which is a type of derivative instrument that allows investors to trade between one another on pair currencies, or technically, on the foreign exchange (FX) rate.
“…We also have other types of CFDs, such as CFD on precious metals, CFD on the index, and more,” he concluded.
SERC And IFC To Continue Partnership To Strengthen Cambodia's Securities Market
In his remarks, Ahoua thanked the SERC for the ongoing fruitful collaboration and emphasised IFC’s dedication to working hand-in-hand with the SERC, the National Bank of Cambodia (NBC), the Cambodian Ministry of Justice (MOJ), and other regulators in Cambodia to develop the derivatives market, recognising their pivotal role in spearheading the crucial legal and regulatory reform agenda.
Over 100 participants took part in the workshop over its two-day run. The workshop was attended by Seng Satya, Deputy Director General of General Department of Civil Affairs, senior management and technical officials of the SERC, officials of the MOJ, representatives of the NBC, and related stakeholders.
This article is adapted from a supplied press release.