Hong Kong Securities and Futures Commission: Expand the Scope of Listed Structural Funds to Strengthen Investor Protection Measures.

According to the Finance App, on June 5th, the Hong Kong Securities and Futures Commission issued a revised letter, aimed at expanding the scope of listed structured funds, including individual stocks with high liquidity and high market value in Hong Kong as the target of leveraged and inverse products. Given the popularity of leveraged and inverse products in the past year, the Securities and Futures Commission believes that now is the appropriate time to expand its regulatory framework from products targeting overseas-listed stocks to products targeting popular Hong Kong-listed stocks. This move will not only expand the tools for retail investors to tailor their investment exposure, but also meet the strong demand from issuers to launch products with Hong Kong stocks as the underlying assets. The new measures will further promote trading activities in the Hong Kong securities market. Since the first launch of leveraged and inverse products with overseas-listed stocks as targets in March 2025, their assets under management and daily trading volume have increased by more than 302 times and 136 times respectively to HK$106 billion and HK$9.3 billion. Such products account for a significant proportion of the Hong Kong leveraged and inverse product market, representing 80% and 78% of the total assets under management and daily trading volume as of May 2026. In order to support the long-term and orderly development of the market, the Securities and Futures Commission has strengthened investor protection measures in the revised letter. For all leveraged and inverse products, the Commission now explicitly requires product providers to continuously monitor the capacity of their products to ensure they can support the target leverage or inverse exposure, maintain a reasonable buffer, and promptly notify the Commission if the operation of the product may be disrupted. For individual stock leveraged and inverse products, the Commission has also introduced stricter criteria for product providers and requires them to develop robust business contingency plans to reduce the higher operational risks of such products. The plans should clearly state emergency and defensive measures, as well as specific trigger conditions for implementing the measures. In addition, for leveraged and inverse products with Hong Kong-listed stocks as targets, the Commission stipulates that if the related stocks are temporarily suspended or halted, trading of the products must be automatically suspended. Other safeguard measures for such complex products will continue to apply, including a maximum leverage ratio of 2x to -2x. Ms. Yang Huiming, Acting Head of the Investment Products Division of the Securities and Futures Commission, said, "The expansion of the product range is a key milestone in the tenth anniversary of the Hong Kong leveraged and inverse product market, allowing investors to have more strategic choices in managing and hedging the exposure to Hong Kong stocks amid uncertain global conditions. Looking ahead, the Commission will continue to collaborate with the industry to promote product innovation while ensuring appropriate safeguard measures are in place to protect investor interests." Since 2016, the Securities and Futures Commission has been following a prudent approach in promoting the growth and diversification of the Hong Kong leveraged and inverse product market over the past decade, expanding the product targets from overseas, Hong Kong, and mainland indices to gradually include commodities, virtual assets, and individual stocks.