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SFC Enhances Regulatory Framework for Daily Leveraged and Inverse Products
2026-07-24 17:12:40 The Securities and Futures Commission (SFC) issued a revised circular to enhance its regulatory framework for authorised leveraged and inverse products (L&I Products), providing product providers greater flexibility in managing their products while drawing investors’ attention to their nature as daily trading instruments. Amidst such rapidly evolving market environment, the SFC will require L&I Products with highly dynamic capacity dependent on evolving market conditions to adopt a flexible leverage structure. Under this structure, the leverage factor may vary daily within the existing caps of 2x for leveraged products and -2x for inverse products. Product providers will therefore have more room to manage L&I Products during high-volume trading sessions by lowering the targeted leverage factor when necessary. The potential daily variation in these products’ leverage factors - to be disclosed after market close every day - will also raise investors’ awareness of L&I Products’ daily product nature, which are not intended for holding beyond one day. This enhancement is a balanced approach that supports L&I Products’ orderly operation under varying market conditions while maintaining their effectiveness as daily trading and hedging instruments for investors by providing daily clarity on the targeted exposure and mitigating large tracking difference risk amid a dynamic market environment. To enhance transparency, the SFC also requires L&I Products providers to publish the targeted leverage factor for the next trading day on their product websites and HKEX website after market close every day. Their product names should also indicate both the flexible leverage feature and the maximum leverage factor. Investors are reminded that these products are not designed for holding beyond one day, as their performance may significantly deviate from the underlying assets. It urges them to conduct daily assessment when trading L&I Products. ~ AASTOCKS Financial News Website: www.aastocks.com | |