Circular to Licensed Corporations - Report on Leveraged Foreign Exchange Trading Activities Carried Out by Licensed Corporations

9 Apr 2020



The Securities and Futures Commission (SFC) today released its Report on Leveraged Foreign Exchange Trading Activities Carried Out by Licensed Corporations which summarises the findings of a survey of the leveraged foreign exchange trading (LFET) activities conducted by 32 firms licensed for Type 3 regulated activity between 1 January 2018 and 31 December 2018.

Key findings of the survey include:

The report also highlights some expected regulatory standards and good industry practices observed by the SFC during the course of its regulatory supervision. The expected regulatory standards cover customer due diligence, handling of client orders, conflicts of interest and information for clients. The senior management of LFET brokers should assume responsibility for developing and implementing policies and controls to comply with the expected regulatory standards.

The expected regulatory standards highlighted in the report are also extracted in the Annex to this circular. LFET brokers are expected to review their policies and controls to ensure compliance with the expected regulatory standards by 1 January 2021.

Should you have any queries regarding this circular, please contact your case officer.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

Enclosure

End

Notes:

  1. The payout for rolling spot forex contracts is based on the fluctuation of foreign exchange rates and the initial maturity of two business days is automatically extended (by one business day at a time) if the contract is still open at the close of trading on the second business day. These products include economically equivalent leveraged foreign exchange contracts.
  2. As part of the survey, a sample of brokers were selected to provide more detailed information. The sampled brokers contributed 77% of market turnover and their clients accounted for 41% of total active LFET clients.

Click here to download the document

Supplementary document:
Report on Leveraged Foreign Exchange Trading (LFET) Activities Carried Out by Licensed Corporations
Annex


Page last updated : 9 Apr 2020