Monday July 27 2026
News Source: Global Exchanges
Focus: Stock Exchange Regulation
Type: General
Country: Hong Kong
On 24th July 2026, 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.
L&I Products include those that track broad-based equity indices or commodities indices, as well as those that aim to deliver a daily return equivalent to a multiple of a single stock’s price return (Single Stock L&I Products). Single Stock L&I Products are a sub-set of L&I Products that reference a single stock.
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.
L&I Products’ capacities refer to the size of the underlying leveraged or inverse exposure that a product can support, taking into account factors such as swap exposures committed by counterparties, position limits applicable to futures and options, daily rebalancing liquidity needs and the availability of alternative means to achieve the targeted exposure. Single Stock L&I Products in general, and certain index-based L&I Products depending on the liquidity of the underlying asset, leverage factor and market conditions are likely to adopt a flexible leverage structure in accordance with the enhanced requirement.
Overseas leveraged and inverse ETFs generally have similar flexibility to lower their leverage factors in response to prevailing market conditions where necessary
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