Uncertificated Securities Market

What is USM?

The Uncertificated Securities Market initiative (USM) provides an efficient means for investors to hold and manage securities in their own names and electronically, using platforms that are operated by approved securities registrars and connected to systems of Hong Kong Securities Clearing Company Limited (HKSCC).

USM brings a NEW way to hold and manage securities
Does it matter how securities are held? Take a look at the 3 ways investors can hold and manage securities after USM implementation:
	Own legal title to securities?	Enjoy all shareholder rights directly?	Trade with ease?	Manage securities online?
In own name in paper form (Retained for now)
	Investors hold legal title to securities and are issued paper certificates. Investors are recorded on the issuer’s book as the registered owner of the securities, and enjoy full shareholder rights directly. However, effecting transfers of legal title is cumbersome and time-consuming due to paper and manual processes, which can take around 10 business days.
Via intermediaries and CCASS (Unchanged)
	Investors who hold securities through intermediaries (banks/brokers) and the Central Clearing and Settlement System (CCASS) do not hold legal title to the securities. Instead, HKSCC Nominees Limited (HKSCC Nominees) is recorded on the issuer’s book as the registered owner of the securities. Paper certificates are issued to HKSCC Nominees and kept in its vault. This means that investors only hold beneficial interest in the securities, and need to rely on intermediaries and HKSCC Nominees to exercise shareholder rights (eg, attend shareholders’ meetings, vote, receive dividends, etc).
In own name without paper certificates (New under USM)
	Investors hold legal title to securities but in uncertificated form, ie, no paper certificate is issued to them. Investors enjoy full shareholder rights directly, and can transfer and manage their securities electronically online. This option will be available to all investors, regardless of how they currently hold their securities.

USM will elevate Hong Kong’s financial market infrastructure by further enhancing efficiency through streamlining and automating processes to minimise the need for paper and manual processes.

The initiative will be implemented in phases over a 5-year period. Over 2,500 listed issuers will have to participate by taking all necessary steps to enable their securities to be held and managed electronically.

+2,500

Over 2,500 Hong Kong-listed issuers will have to participate in USM within five years.

~5,000,000

About 5 million paper certificates held by HKSCC will be converted to uncertificated form.

~11,000,000

Possible for about 11 million paper certificates held by investors outside CCASS to also be converted to uncertificated form.

What are the Benefits of USM?

Investors

Option to enjoy both better Investor Protection and Trading Convenience

	Investors who participate in USM will be able to:
	Enjoy full shareholder rights directly, including the right to receive corporate communications, attend and vote at shareholders’ meetings, exercise corporate action rights, and receive dividends and other entitlements — all without having to go through an intermediary.
	View and manage holdings with just a few clicks, including sending instructions via the relevant approved securities registrar’s electronic platform to deposit/withdraw securities into/out of CCASS, or to transfer them to someone outside of CCASS.
	Enjoy faster and more efficient processing, including effecting transfers as quickly as within the same day (if the securities are already in uncertificated form) and within five business days (if the securities have yet to be converted into uncertificated form).

Issuers

Enhanced Corporate Governance and Investor Engagement

Listed issuers will benefit from greater shareholder transparency as more investors move towards holding their securities in uncertificated form in their own names under USM.

Instead of communicating through layers of intermediaries, listed issuers will be able to engage with their shareholders directly, thus facilitating interaction between listed issuers and shareholders and enhancing corporate governance.

Markets

More Efficient, Digitalised and Greener Markets

The removal of paper and manual processes under USM will enhance efficiency for intermediaries and other market participants, while preserving their respective roles in the trading and clearing process.

Overall, USM will also provide opportunities for cost savings and straight-through processing, contribute to greener markets in line with global trends, and further elevate Hong Kong’s market infrastructure, thus reinforcing its competitiveness and status as an international financial centre.

How do I sell securities on the SEHK if I am holding them in my own name in uncertificated form?

Similar to today, investors who hold securities in their own names (and manage them through an electronic platform set up with the issuer’s approved securities registrar) will need to deposit the securities into CCASS if they wish to use them to settle trades executed on the Stock Exchange of Hong Kong Limited (SEHK). This means the securities have to be transferred to HKSCC Nominees.

However, unlike today, the process for effecting such transfers under USM will be electronic rather than paper-based (Diagram 1). The process will therefore be completed much more quickly than today, ie, as quickly as within the same day if all relevant information is received in time (compared to the standard 10 business days currently needed for the paper process). This faster processing time is possible because of the new electronic interface between the systems of each approved securities registrar and those of HKSCC.

Diagram 1

1 Investor contacts bank/broker Investor instructs bank/broker of intention to deposit securities into CCASS (ie, to transfer securities to HKSCC Nominees).	Bank/broker initiates the transfer by entering transfer details into CCASS. HKSCC transmits transfer details to approved securities registrar.	2 Investor affirms transfer Investor receives notification from approved securities registrar and affirms transfer details if correct.	Approved securities registrar receives investor’s affirmation.	3 Securities can be used for settlement Securities are deposited into CCASS, and investor can use them to settle trades executed on SEHK.

	Approved securities registrar conducts validation checks, and if in order, sends transfer details to investor to affirm.		Approved securities registrar registers the transfer in the issuer’s book and informs HKSCC and investor that the transfer has been registered.

What do I do if my securities are already in CCASS and I want to hold them in my own name?

Similar to today, the securities will need to be withdrawn from CCASS by transferring them from HKSCC Nominees into the relevant investor’s own name.

However, unlike today, the process for effecting such transfers under USM will be electronic rather than paper-based (Diagram 2). The process will therefore be completed much more quickly, ie, as quickly as within the same day if all relevant information is received in time (compared to the current 10 business days).

Diagram 2

1 Investor contacts bank/broker Investor instructs bank/broker of intention to withdraw securities from CCASS (ie, to transfer securities from HKSCC Nominees to the investor).	Bank/broker initiates the transfer by entering transfer details into CCASS. HKSCC transmits transfer details to approved securities registrar.	2 Investor affirms transfer Investor receives notification from approved securities registrar and affirms transfer details if correct.	Approved securities registrar receives investor’s affirmation.	3 Securities are withdrawn from CCASS and are in investor’s name Once registered in the investor’s name, the investor can hold and manage them electronically online via the approved securities registrar’s platform.

	Approved securities registrar conducts validation checks, and if in order, sends transfer details to investor to affirm.		Approved securities registrar registers the transfer in the issuer’s book and informs HKSCC and investor that the transfer has been registered.

What is the Implementation Timeline?

2025 The SFC, Hong Kong Exchanges and Clearing Limited and the Federation of Share Registrars Limited are working closely to carry out the necessary technical preparations and system upgrades.		Early 2026: USM Launch USM is targeted to be launched in early 2026.

	End-2025 The actual commencement date will be announced in the fourth quarter of 2025.	Launch to early 2031: 5-Year Transition Period Issuers of SEHK-listed prescribed securities (eg, shares, depositary receipts, real estate investment trusts, subscription warrants and rights under a rights issue) will have to participate in USM within five years from launch. The actual participating date will be decided by the relevant approved securities registrar, HKSCC and SEHK, taking into account circumstances specific to each issuer. The five-year timeline will initially apply only to prescribed securities that are constituted under the laws of Hong Kong, Bermuda, the Cayman Islands or Mainland China.