--- title: What Is Non-Prefunding? Vietnam Foreign Investor Mechanism description: Understand Vietnam's non-prefunding under Circular 68/2024/TT-BTC, VSDC T+2 settlement cutoffs, and broker obligations when foreign funds face deficits. url: https://ginity.vn/en/blog/what-is-non-prefunding-vietnam-foreign-investors canonical: https://ginity.vn/en/blog/what-is-non-prefunding-vietnam-foreign-investors markdown: https://ginity.vn/en/blog/what-is-non-prefunding-vietnam-foreign-investors.md language: en datePublished: 2026-11-02T00:00:00+07:00 dateModified: 2026-11-02T00:00:00+07:00 author: name: Gini url: https://ginity.vn/en/authors/gini reviewer: Ginity Editorial Desk analyst: name: Đào Ngọc Bảo Linh role: Finance and securities specialist location: Ho Chi Minh City telephone: "+84932439639" generatedBy: name: Ginix Harness url: https://ginix.vn desk: id: learn name: Learn investing url: https://ginity.vn/en/learn tickers: - SSI - VCI sources: - name: Ministry of Finance url: https://vanban.chinhphu.vn/?docid=211243&pageid=27160 title: Circular No. 68/2024/TT-BTC amending regulations on securities trading and the non-prefunding mechanism - name: Ministry of Finance url: https://vanban.chinhphu.vn/?docid=213548&pageid=27160 title: Circular No. 18/2025/TT-BTC amending Circular 119/2020/TT-BTC on securities registration, custody, clearing and settlement - name: Vietnam Securities Depository and Clearing Corporation (VSDC) url: https://vsdc.vn/vi/sd/XAz40d2Q-9j569TvBgLQaQ title: Regulations on Clearing and Settlement of Securities Transactions at VSDC under Decision No. 39/QD-HDTV - name: Vietnam Government Portal url: https://baochinhphu.vn/thong-tu-68-gop-phan-nang-hang-thi-truong-chung-khoan-102240918190413978.htm title: Circular 68 removes key bottlenecks to meet emerging market upgrade standards - name: Vietnam Investment Review / Securities News url: https://www.tinnhanhchungkhoan.vn/rao-riet-chuan-bi-cho-non-prefunding-post355786.html title: Implementing non-prefunding trading operations for institutional foreign investors - name: FTSE Russell url: https://www.lseg.com/en/media-centre/press-releases/ftse-russell/2026/ftse-russell-announces-results-march-2026-semi-annual-country-classification-review-equities-fixed-income title: FTSE Russell announces results of March 2026 semi-annual country classification review for equities and fixed income publisher: Ginity attribution: 'Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content.' disclaimer: "Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources." usageTerms: https://ginity.vn/ai.txt --- # What Is Non-Prefunding? Vietnam Foreign Investor Mechanism > Understand Vietnam's non-prefunding under Circular 68/2024/TT-BTC, VSDC T+2 settlement cutoffs, and broker obligations when foreign funds face deficits. Gini · Learn investing · 2026-11-02 · https://ginity.vn/en/blog/what-is-non-prefunding-vietnam-foreign-investors _Lead analyst: Đào Ngọc Bảo Linh · Finance and securities specialist · Ho Chi Minh City · 0932 439 639_ ## Key takeaways - Under Circular 68/2024/TT-BTC effective November 2, 2024, foreign institutional investors can execute equity buy orders without 100% cash prefunding. - Circular 18/2025/TT-BTC clarifies in Article 40k that broker settlement financing is strictly distinct from retail margin lending facilities. - On settlement day T+2, 09:30 is the cutoff for global custody banks to request broker funding and 10:30 is the clearing cash balance freeze at BIDV. - Under VSDC Decision 39/QD-HDTV dated April 29, 2025, default positions are transferred to the broker proprietary account if unpaid by T+3 afternoon. Prior to November 2024, the Vietnamese equity market required full 100% cash prefunding from all market participants before an order could be entered into trading systems according to [Circular No. 68/2024/TT-BTC](https://vanban.chinhphu.vn/?docid=211243&pageid=27160) on September 18, 2024. This rule posed an operational challenge for international institutional investors, including pension funds and sovereign wealth vehicles, whose assets are held across global custody banks in distant time zones. The Ministry of Finance addressed this barrier through Circular No. 68/2024/TT-BTC, introducing the Non-Prefunding Solution (NPS) for foreign institutional investors. This guide explains the order workflow, the clearing and settlement timeline at VSDC, the risk governance of brokerages, and how this mechanism differs from retail margin lending. ## What Non-Prefunding Means in Vietnam Equities The non-prefunding mechanism allows eligible foreign institutional investors to place buy orders without having 100% cash available on their domestic trading accounts at order placement, according to [Circular No. 68/2024/TT-BTC](https://vanban.chinhphu.vn/?docid=211243&pageid=27160) issued on September 18, 2024. Enacted through Article 9a of Circular 120/2020/TT-BTC and effective from November 2, 2024, this mechanism is reserved solely for foreign legal entities. Domestic retail investors, domestic legal entities, and foreign natural persons remain subject to standard cash prefunding rules. According to risk procedures established under [Circular No. 68/2024/TT-BTC](https://vanban.chinhphu.vn/?docid=211243&pageid=27160), each securities company evaluates client creditworthiness and assigns trading limits alongside collateral ratios on November 2, 2024. In official guidelines, initial cash requirements can range from 0% to 100% of order value depending on bilateral agreements during the 2026 period. $$\text{Broker Settlement Amount} = \text{Gross Purchase Value} \times (100\% - \text{Initial Margin Ratio})$$ In an illustrative 2026 calculation according to exchange rules, suppose a foreign fund purchases 10 billion VND worth of SSI shares with an initial margin ratio of 20% approved in the third quarter of 2026. The fund deposits 2 billion VND upon trade date T, while the remaining 8 billion VND is funded through standard clearing channels. For general background on standard settlement horizons, read our overview of the [T+2 settlement cycle](/en/blog/t2-settlement-cycle-trading-fees). ## T+2 Settlement Timeline and Critical Cutoff Times Clearing and settlement workflows for non-prefunding orders follow a disciplined timetable coordinated between the Vietnam Securities Depository and Clearing Corporation (VSDC), the settlement bank BIDV, custody banks, and brokerages. According to the [Regulations on Clearing and Settlement of Securities Transactions at VSDC](https://vsdc.vn/vi/sd/XAz40d2Q-9j569TvBgLQaQ) promulgated under Decision No. 39/QD-HDTV on April 29, 2025, specific clearing cutoff points govern days T+1 and T+2. ```flow Non-prefunding clearing and default resolution workflow: Day T: Order Placement Foreign institutional investor submits buy order with agreed initial collateral ratio Day T+1 (15:00-16:00): Deficit Reporting Custody bank flags cash shortfall and broker reserves settlement funds at BIDV Day T+2 (09:30-10:15): Broker Funding Window Custody bank requests funding by 09:30 and broker transfers deficit cash by 10:15 Day T+2 (10:30-12:00): Settlement Execution Final balance freeze at 10:30 followed by multilateral DVP delivery by 12:00 Day T+2 Afternoon to T+3: Investor Confirmation or Default Client reimburses funds by T+3; otherwise shares transfer to broker book ``` | Time Window | Operating Entity | Operational Clearing Action | |---|---|---| | T+1 (15:00) | Custody Bank | Reports foreign fund cash deficits to the executing broker and VSDC | | T+1 (15:30) | Securities Broker | Secures sufficient cash on clearing accounts at the settlement bank for fund reservation | | T+1 (16:00) | VSDC | Executes multilateral netting and removes non-guaranteed defaulting trades | | T+2 (09:30) | Custody Bank | Final deadline to request broker settlement financing for client deficit | | T+2 (10:15) | Broker and Settlement Bank | Completes cash transfer into the foreign brokerage clearing account at the settlement bank | | T+2 (10:30) | VSDC and Depository Members | Final cutoff for clearing balances; members lacking funds are declared insolvent | | T+2 (11:00 - 12:00) | VSDC and Settlement Bank | Executes simultaneous Delivery Versus Payment (DVP) book entries | | T+2 (13:00) | Depository Members | Allocates securities and funds into client accounts ahead of afternoon trading | The 09:30 cutoff on day T+2 represents a critical operational juncture for global institutional accounts holding custody with international banks under [Regulations on Clearing and Settlement of Securities Transactions at VSDC](https://vsdc.vn/vi/sd/XAz40d2Q-9j569TvBgLQaQ) on April 29, 2025. If the investor fails to deliver funds by 09:30, the custody bank submits a formal request for the executing broker to advance clearing capital. By 10:30 on day T+2, all clearing accounts at the settlement bank must reflect settled balances. ## Comparing Non-Prefunding and Margin Facilities Investors often confuse non-prefunding arrangements with margin facilities. However, Vietnamese regulatory frameworks establish a strict distinction between institutional clearing facilitation and retail leverage. Under Article 40k Clause 3 of Circular 119/2020/TT-BTC, introduced via [Circular No. 18/2025/TT-BTC](https://vanban.chinhphu.vn/?docid=213548&pageid=27160) on April 26, 2025, broker settlement financing for foreign institutions does not constitute a margin lending activity under securities law. | Comparison Parameter | Non-Prefunding Facility | Retail Margin Facility | |---|---|---| | Eligible Participants | Foreign institutional entities incorporated abroad | Domestic and foreign retail traders meeting margin terms | | Primary Objective | Overcoming cross-border payment frictions and time zones | Leveraging portfolio purchasing power | | Capital Holding Period | Short-term bridge from T+2 to close of T+3 afternoon | Extended revolving credit (typically 3 to 6 months) | | Cost Structure | Service and settlement handling fee under bilateral contract | Daily accrued margin interest based on outstanding debt | | Risk Enforcement | Mandatory transfer to broker proprietary book for open-market disposal | Forced liquidation (force sell) triggered by maintenance ratios | | Stock Coverage | Securities approved under broker risk underwriting limits | Exchange-approved margin list updated periodically | To review how margin ratios and liquidation thresholds work for retail investors, consult our detailed analysis on [force sell and margin maintenance ratios](/en/blog/force-sell-mechanics-and-margin-maintenance-ratios). ## Broker Default Procedures When Foreign Funds Fail When a foreign institutional investor fails to remit purchase funds within designated deadlines, brokerages initiate standardized recovery and asset disposal procedures. According to Article 40k of Circular 119/2020/TT-BTC amended under Circular 18/2025/TT-BTC, the shares acquired through broker financing are locked on day T+2. The institutional client must confirm its settlement obligation with the securities company before the close of afternoon trading on day T+2. First Scenario: If the client explicitly confirms non-fulfillment or fails to submit confirmation by the end of T+2 afternoon trading, the broker requests VSDC to transfer ownership of the locked shares directly to the broker proprietary account on day T+2. Second Scenario: If the client confirms its payment obligation, the final payment deadline extends to the close of afternoon trading on the next business day (day T+3). If funds remain unpaid at that cutoff, VSDC completes ownership transfer to the broker proprietary account on day T+3. Upon receiving the shares into its proprietary account, the brokerage may sell the position on the open exchange. Under Article 33 of Circular 96/2020/TT-BTC amended by Circular 18/2025/TT-BTC, transactions executed within 04 business days of ownership transfer are officially exempt from prior disclosure obligations for major insiders and affiliated persons. In addition, the brokerage must submit a formal disclosure report to the State Securities Commission, stock exchanges, and VSDC within 24 hours of detecting the payment default. According to reporting in [Securities News](https://www.tinnhanhchungkhoan.vn/rao-riet-chuan-bi-cho-non-prefunding-post355786.html) on October 17, 2024, securities brokerages actively prepared operational systems and risk underwriting protocols to guarantee 100% settlement execution under the non-prefunding framework. ## Market Access Impact on FTSE Russell Emerging Status The removal of mandatory prefunding directly targeted the most significant bottleneck highlighted in international market reviews of Vietnam. According to coverage from the [Vietnam Government Portal](https://baochinhphu.vn/thong-tu-68-gop-phan-nang-hang-thi-truong-chung-khoan-102240918190413978.htm) on September 18, 2024, settlement cycle constraints and failed trade remedies had kept Vietnam on the watch list for secondary emerging market status. In its country classification report published by [FTSE Russell](https://www.lseg.com/en/media-centre/press-releases/ftse-russell/2026/ftse-russell-announces-results-march-2026-semi-annual-country-classification-review-equities-fixed-income) in March 2026, the index provider acknowledged tangible advancements in broker connectivity and international fund accessibility. Non-prefunding enhances capital turnover, mitigates currency conversion frictions, and shortens execution cycles when allocating into large-cap equities on the HOSE and HNX. It serves as an essential transition phase prior to implementing a full Central Counterparty (CCP) clearing model across the entire Vietnamese exchange system. ## Frequently Asked Questions ### Who is eligible for non-prefunding in Vietnam? The non-prefunding mechanism applies exclusively to foreign institutional investors established under foreign laws according to Circular 68/2024/TT-BTC. Domestic retail traders, domestic institutions, and foreign individuals must maintain 100% cash prefunding prior to order execution. ### What is the deadline to request broker funding? According to Decision No. 39/QD-HDTV dated April 29, 2025, custody banks must send formal notices to the broker and VSDC by 09:30 on day T+2 if client cash balances are insufficient. ### How are default shares handled by brokerages? Defaulted shares are transferred to the broker proprietary account if the foreign client fails to fulfill payment obligations. Brokerages selling these positions on the open exchange within 04 business days of ownership transfer benefit from statutory exemptions from prior insider trading disclosure requirements, and must notify market regulators within 24 hours of detecting investor default. ## Sources - Ministry of Finance: [Circular No. 68/2024/TT-BTC amending regulations on securities trading and the non-prefunding mechanism](https://vanban.chinhphu.vn/?docid=211243&pageid=27160) (18/09/2024) - Ministry of Finance: [Circular No. 18/2025/TT-BTC amending Circular 119/2020/TT-BTC on securities registration, custody, clearing and settlement](https://vanban.chinhphu.vn/?docid=213548&pageid=27160) (26/04/2025) - Vietnam Securities Depository and Clearing Corporation (VSDC): [Regulations on Clearing and Settlement of Securities Transactions at VSDC under Decision No. 39/QD-HDTV](https://vsdc.vn/vi/sd/XAz40d2Q-9j569TvBgLQaQ) (29/04/2025) - Vietnam Government Portal: [Circular 68 removes key bottlenecks to meet emerging market upgrade standards](https://baochinhphu.vn/thong-tu-68-gop-phan-nang-hang-thi-truong-chung-khoan-102240918190413978.htm) (18/09/2024) - Vietnam Investment Review / Securities News: [Implementing non-prefunding trading operations for institutional foreign investors](https://www.tinnhanhchungkhoan.vn/rao-riet-chuan-bi-cho-non-prefunding-post355786.html) (17/10/2024) - FTSE Russell: [FTSE Russell announces results of March 2026 semi-annual country classification review for equities and fixed income](https://www.lseg.com/en/media-centre/press-releases/ftse-russell/2026/ftse-russell-announces-results-march-2026-semi-annual-country-classification-review-equities-fixed-income) (31/03/2026) ## Frequently asked questions ### Who is eligible for non-prefunding in Vietnam? The non-prefunding mechanism applies exclusively to foreign institutional investors established under foreign laws according to Circular 68/2024/TT-BTC. Domestic retail traders, domestic institutions, and foreign individuals must maintain 100% cash prefunding prior to order execution. ### What is the deadline to request broker funding? According to Decision No. 39/QD-HDTV dated April 29, 2025, custody banks must send formal notices to the broker and VSDC by 09:30 on day T+2 if client cash balances are insufficient. ### How are default shares handled by brokerages? Defaulted shares are transferred to the broker proprietary account if the foreign client fails to fulfill payment obligations. Brokerages selling these positions on the open exchange within 04 business days of ownership transfer benefit from statutory exemptions from prior insider trading disclosure requirements, and must notify market regulators within 24 hours of detecting investor default. --- _Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content._ _Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources._