SFC expands listed fund universe to leveraged and inverse products referencing Hong Kong-listed single stocks with enhanced safeguards

HIGHLIGHTS

The Securities and Futures Commission (SFC) today issued a revised circular to broaden the range of listed structured funds to include Single Stock Leveraged and Inverse (L&I) Products referencing highly liquid Hong Kong-listed mega-cap stocks (Note 1).

In light of strong market reception for Single Stock L&I Products over the past year, the SFC considers the time is ripe to extend the regulatory framework from products referencing overseas-listed stocks to those based on popular Hong Kong-listed stocks (Note 2). This will not only expand retail investors’ tools to customise investment exposure, but will also address issuers’ growing interests to launch products with Hong Kong equities as underlying.

The new move will further support trading activities in the city’s securities market. Since the debut of Single Stock L&I Products referencing overseas-listed stocks in March 2025, their assets under management (AUM) and average daily turnover (ADT) have surged more than 302 times to HK$106 billion and 136 times to HK$9.3 billion, respectively. They accounted for a significant proportion of Hong Kong’s L&I Products market at 80% of total AUM and 78% of ADT as of May 2026.

To support orderly market development over the long term, the SFC has also strengthened investor safeguards in the revised circular. For all L&I Products, product providers are now explicitly required to continuously monitor their products’ capacities to support the targeted leveraged or inverse exposure, maintain a reasonable buffer, and promptly notify the SFC of any potential issues disrupting product operations. For Single Stock L&I Products, the SFC has also introduced enhanced eligibility criteria for product providers, together with requirements to establish robust business continuity plans to mitigate heightened operational risks for such products. These plans should set out clear contingency and defensive measures with defined triggers for activation (Note 3).

In addition, the SFC requires automatic trading suspension for Single Stock L&I Products referencing Hong Kong-listed stocks if their underlying shares are halted or suspended from trading. Other safeguards for these complex products continue to apply, including a maximum leverage factor of 2x to -2x.

“The expansion of product scope represents a pivotal milestone in the 10th anniversary of Hong Kong’s L&I Products market, increasing strategic options for investors to manage and hedge exposure to Hong Kong stocks as they navigate an uncertain global landscape,” said Ms Alexandra Yeong, the SFC’s Interim Head of Investment Products. “Going forward, the SFC will remain steadfast in championing product innovation via industry collaboration, while ensuring that appropriate safeguards are in place to protect investors.”

Since 2016, the SFC has adopted a steady approach to develop and diversify the city’s L&I Products market over a decade, gradually expanding from products referencing overseas, Hong Kong and Mainland indices to commodities, virtual assets and single stocks.

End

Notes:

1. Single Stock L&I Products are a sub-set of L&I Products, which aim to deliver a daily return equivalent to a multiple of a single stock’s daily price return.
2. The expanded scope excludes shares of companies which may be dually listed in Hong Kong and the Mainland, as well as shares listed on any Mainland exchanges. Prior to the expansion, Single Stock L&I Products offered to the Hong Kong public may only reference highly liquid mega-cap stocks listed on major overseas exchanges. Please refer to press release dated 23 January 2025.
3. Such measures may include deleveraging and establishing a stop-loss mechanism to limit the downside of the product when the underlying stock experiences extreme price movements.