SFC enhances regulatory framework for daily leveraged and inverse products to ensure orderly market trading

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24 Jul 2026 The Securities and Futures Commission (SFC) today 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 (Note 1).

Hong Kong’s L&I Products market has expanded significantly since the beginning of 2026, driven by the surge in Single Stock L&I Products. As a result, these products’ operations have become increasingly dependent on the broader ecosystem surrounding the underlying stocks to maintain the targeted leverage exposure.

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 (Note 2). 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 (Note 3). 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.

“These enhancements are timely adjustments in response to evolving market environment, aiming to support the sustainable development of the market while ensuring appropriate investor safeguards remain in place,” said Ms Elisa Ng, the SFC’s Executive Director of Investment Products. “The updates also promote a better understanding of the daily nature and complexity of L&I products. Investors should understand their features and associated risks, distinguish them from products geared for overnight or long-term holding, and carefully assess whether these products suit their investment needs before investing.”

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. To facilitate understanding of these complex products, the SFC has issued an infographic themed “D-A-I-L-Y” to provide a checklist for investors and urge them to conduct daily assessment when trading L&I Products.

End

Notes:

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.

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

Page last updated 24 Jul 2026