Cambodian Securities Market (CSM) officially started its operation in 2010. This element of the financial structure of the jurisdiction performs a governing function in relation to the functioning of trade platforms, clearing services and settlements. Since 2020, amendments to the law on licensing in this area have come into force. Under the new legislation, the broker license in Cambodia has changed its validity period, in addition, certain modifications have influenced amount of capital required for brokerage companies and the cost of applying for a permit.
CFD as a derivative
Based on legal provisions, a derivative is a contract between two parties where the value of the contract is determined by fluctuations in costs of starting assets such as equity and debt securities, currencies, commodities including crude oil, gold, natural gas and PPN.
This type of securities makes it possible for experienced investors to improve their own positions, as well as to trade on fluctuations in the exchange rate, percentage or value of assets.
Licenses for business and activities related to derivatives
- A central counterparty clearing palate (CCP) is considered to be a segment reducing operational, settlement, market, legal and non-payment risks for traders. CCP can become a buyer and the seller counterparty, and ensure compliance with transaction’s terms, even if either party fails to fulfill its own duties under transaction. Securities and Exchange Commission of Cambodia SERC issues licenses for 2 years to applicant enterprises that fully comply with all relevant requirements. Renewable license is active for 3 years. Securities companies that are properly licensed and certified may apply to relevant authorities for permit to conduct additional activities. When running a CCP business, terms and conditions regarding leverage, starting margin, minimum and maximum trades, etc. must be met.
- Derivative broker license in Cambodia. This is a derivatives brokerage firm. The legislation considers applications and issues a license only to firms that comply with all points of the law. This license is valid for 2 years and can be renewed in the future. At the same time, companies that have a license to conduct business in securities may request permission from authorities to conduct additional activities in the form of a derivatives broker. However, such enterprises will need to think about how to differentiate activities, as well as to meet new demands that may be put forward in connection with them.
- Manufacturing representative. This is an individual licensed by SERC, who is authorized to open and manage accounts for clients, as well as to provide other services as a derivatives broker. Anyone who wants to officially become a representative of derivative financial instruments must have the appropriate education and experience in conducting business activities. Businesses that intend to act as representatives need to possess a letter of acceptance from the derivative broker.
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