On 20 April 2026 the Securities and Futures Commission (SFC) issued the “Circular on secondary trading of tokenised SFC-authorised investment products” (Circular), establishing a regulatory framework for secondary trading of tokenised SFC-authorised investment products (Tokenised Products) by the public in Hong Kong via on-platform trading provided by SFC-licensed virtual asset trading platforms (VATPs).
Since the SFC’s initial publication of tokenisation related circulars in 2023, there have been multiple tokenised SFC-authorised funds launched in Hong Kong; however, only primary dealing (i.e. subscription and redemption) of tokenised units were allowed. With the release of this new Circular and the updated “Circular on tokenisation of SFC-authorised investment products”, secondary trading of Tokenised Products is now allowed. This new development has the potential to improve Tokenised Products’ tradability and integration with the Web3.0 ecosystem in Hong Kong.
In this article, we summarise the key requirements set out in the Circular.
Core Requirements
Trading Channel
Secondary trading of Tokenised Products is permitted via on-platform auto-matching on SFC-licensed VATPs, conducted in accordance with the VATP guidelines issued by the SFC. Managers who intend to offer secondary trading for their Tokenised Products should test the trading system with VATPs before launch to ensure that the on-platform trading arrangements, including operational processes, risk controls and system readiness, are satisfactory.
Fair Pricing
VATPs and SFC-licenced corporations which facilitate trading on platform must implement a price deviation alert to alert investors when the execution price on the platform deviates significantly from real-time or near real-time indicative NAV (iNAV) per unit of the Tokenised Product. Investors must be informed of their option to subscribe or redeem units of the Tokenised Product at net asset value in the primary market instead of secondary trading and the resulting implications. VATPs are expected to implement system controls, automated pre-trade and regular post-trade monitoring, and other controls to prevent excessive price fluctuations (eg, trading bands based on the product’s last executed price with cooling-off periods) and market manipulation, and to identify any suspicious market manipulative or abusive activities.
Liquidity and Market Making
Managers must use their best endeavours to appoint at least one market maker (with at least one market maker will give no less than three months’ notice for termination) to ensure there is sufficient liquidity in the on-platform secondary market of their Tokenised Products. Managers should appoint SFC-licensed corporations or registered institutions as distributors for creations/redemptions of tokenised units in the primary market, and put in place arrangements with VATPs to ensure seamless transfer of Tokenised Products across primary and secondary markets.
VATPs must perform due diligence and ongoing monitoring of market makers of the Tokenised Products admitted to their platforms and ensure that all market makers maintain appropriate commitment to bid-ask spreads, quote size of market making orders, minimum time for which a market making order is maintained, and participation rates.
Disclosure
In addition to the disclosures about tokenisation arrangement, the offering documents and product key facts statement must clearly set out secondary trading related disclosures, for examples, liquidity and price-deviation risks (especially large premiums/discounts outside normal trading hours, price-fragmentation risks, market-maker reliance risks, etc.), key information of the trading channel, the circumstances under which secondary trading of the Tokenised Products may be suspended and the list of market makers and any affiliated entities of the product providers acting as the market makers, along with disclosures on the associated potential conflicts of interest.
VATPs and brokers must maintain dedicated interfaces showing real-time/near real-time iNAV (updated at least every 15 seconds), last NAV, full secondary-trading details and prominent risk warnings.
Implications for Fund Managers
Managers who intend to launch new SFC-authorised funds with tokenisation features or introduce secondary trading to their existing tokenised SFC-authorised funds should consult the SFC early before submitting formal application with the SFC.
As part of project planning, managers shall line up the relevant service providers with the requisite expertise (e.g. VATP, eligible distributors, market makers) and ensure the required infrastructure (e.g iNAV dissemination, Price Deviation Alerts, system control to prevent market manipulation) is in place.
