This section provides the definitions of certain terms that appear on this site and some SFC codes and guidelines. It also contains the general definitions of some commonly-used financial terms.
Disclaimer: Terms and definitions in this section are for reference only. Please do NOT regard this as a legal tool.
Glossary terms are listed in alphabetical order.
Which companies are “recognised exchange companies” under the Securities and Futures Ordinance (SFO)?
Hong Kong has only two recognised exchange companies:
the Stock Exchange of Hong Kong Limited; and
Hong Kong Futures Exchange Limited.
Both are deemed to be “recognized exchange companies” by virtue of section 5(a) of Part 1 of Schedule 10 to the SFO.
Entities seeking to become recognised exchange companies should contact us for further information.
Which markets are “recognised stock markets” under the SFO?
A recognised stock market is any stock market operated by a recognised exchange company. In Hong Kong, the only recognised stock market is the stock market operated by the Stock Exchange of Hong Kong Limited.
Which markets are “recognised futures markets” under the SFO?
A recognised futures market is any futures market operated by a recognised exchange company. In Hong Kong, the only recognised futures market is the futures market operated by the Hong Kong Futures Exchange Limited.
What do the terms "specified futures exchanges", "specified stock exchanges" and "specified exchanges" refer to?
The term “specified futures exchanges” refers to those futures exchanges specified in Part 2 of Schedule 1 to the SFO. The term appears in the definition of “leveraged foreign exchange trading” – essentially, certain activities relating to contracts traded on a “specified futures exchange” are excluded from the definition of “leveraged foreign exchange trading”. The term “specified futures exchange” is also used in the Securities and Futures (Recognized Counterparty) Rules to define which institutions may be regarded as recognized counterparties.
The term “specified stock exchanges” refers to those stock exchanges specified in Part 3 of Schedule 1 to the SFO. It is used in connection with the definition of “leveraged foreign exchange trading” – again, certain activities relating to transactions executed on a “specified stock exchange” are excluded from the definition of “Leveraged foreign exchange trading”. The term “specified stock exchange” is also used in connection with matters relating to disclosure of interests under Part XV of the SFO, and to price stabilizing under the Securities and Futures (Price Stabilizing) Rules.
The term “specified exchanges” refer to those exchanges specified in Schedule 3 of the Securities and Futures (Financial Resources) Rules (FRR). By reference to the “specified exchanges,” the FRR prescribes treatments of assets and liabilities arising from, or related to, dealings in products traded on those exchanges.
Which are the recognized clearing houses under the SFO?
Hong Kong has four recognized clearing houses under the SFO. They are:
Hong Kong Securities Clearing Company Limited;
HKFE Clearing Corporation Limited;
SEHK Options Clearing House Limited; and
OTC Clearing Hong Kong Limited.
The first three are deemed to be “recognized clearing houses” by virtue of section 6 of Part 1 of Schedule 10 to the SFO. The fourth was recognized as a clearing house, pursuant to section 37(1) of the SFO, on 25 October 2013 and commenced operation on 25 November 2013.
Companies seeking to become recognized clearing houses under the SFO should contact us for further information.
Hong Kong Futures Exchange (“HKFE”) will introduce an after-hours trading session (“AH Session”) after the close of the regular trading session. Under the Securities and Futures (Contracts Limits and Reportable Positions) Rules (“CLR”), any person who holds or controls a reportable position in futures contracts or stock options contracts must lodge a written notice of that position with HKFE or SEHK within one business day following the day on which the person holds or controls the position. For reportable positions arising from trading in the AH Session, intermediaries may have operational difficulties in lodging notices of these positions (both for clients and for their own accounts) with HKFE within one business day. As trades transacted in the AH Session will be registered by HKFE as the following day’s trades, can these trades be combined with trades transacted in the regular trading session on the following business day for reporting purposes?
After considering the operational difficulties faced by intermediaries, the SFC will regard it as acceptable for trades transacted in the AH Session to be combined with trades transacted in the regular trading session on the following business day for the purpose of meeting the requirements for reportable positions under the CLR. Nevertheless, intermediaries should monitor the positions during the AH Session to ensure that they comply with the prescribed limits under the CLR and the position limits established by HKFE.
Intermediaries which provide after-hours futures trading services in HKFE products should inform their clients about this reporting arrangement.
How do the Securities and Futures (Contracts Limits and Reportable Positions) Rules apply to different fund management entities (eg, management companies, sub-investment managers or co-investment managers of the fund, etc) ?
Fund management companies are subject to the prescribed limits and reporting obligations as long as they hold or control any futures or options contracts as prescribed in the Rules, whether for their own or in respect of the funds. Nevertheless, provided that these management companies do not have discretion in relation to the positions (eg, the day-to-day investment management of the funds has been delegated to investment managers or sub-managers), they are not required to aggregate the funds’ positions, or the funds’ positions with their own positions, if any, in order to comply with the Rules. In this case, the prescribed limits and reporting obligations shall apply separately to the fund management companies’ own positions and each of the funds they hold.
On the other hand, investment managers including sub- or co-investment managers who carry out the investment management functions in respect of the funds are generally required to aggregate the positions for the purpose of compliance. However, if they do not hold or control any positions in the futures or options contracts as prescribed in the Rules, they will not be subject to the relevant prescribed limits and reporting requirements.
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Last update: 19 Dec 2023