Hong Kong: SFC launches new framework for secondary trading of tokenised investment products

On 20 April 2026, the Securities and Futures Commission (the "SFC") issued a circular on secondary trading of tokenised SFC-authorised investment products (the "Circular"), setting out the requirements under which the SFC would consider allowing secondary trading of tokenised SFC-authorised investment products ("Tokenised Products") by the public in Hong Kong. The regime builds on the SFC's November 2023 tokenisation circulars and draws on ETF trading practices and SFC-licensed virtual asset trading platform (VATP) infrastructure.

Since the SFC first set out its tokenisation-related regulatory framework in late 2023, product issuers in Hong Kong have been keen on tokenising their products and capitalising on the resulting market opportunities. As of March 2026, 13 tokenised products were offered to the public in Hong Kong, with the assets under management of their tokenised classes increasing around seven-fold to $10.7 billion over the past year. Against this backdrop, the SFC considers it an opportune time to pilot 24/7 secondary trading to further integrate tokenised products with the Web3 ecosystem. The Circular's new measures are drawn from the trading of exchange-traded funds and SFC-licensed VATP infrastructure, and cover fair pricing, orderly trading, liquidity provision and disclosure.

Trading channel

Under the Circular, secondary trading of Tokenised Products may be offered to retail investors by means of on-platform trading provided by SFC-licensed virtual asset trading platforms ("VATPs") and should follow the existing trading operation, rules and risk control measures applicable to SFC-licensed VATPs' on-platform trading of virtual assets under the Guidelines for Virtual Asset Trading Operators (the "VATP Guidelines"). An SFC-licensed VATP should execute a trade for a client only if the client's account has sufficient capital or product holdings of equivalent trading fungibility to cover that trade. According to the SFC's accompanying press release, the SFC may also consider over-the-counter secondary trading arrangements on a case-by-case basis. Before launch, Product Providers should work with the relevant SFC-licensed VATPs to test the on-platform trading arrangements and ensure that operational processes, risk controls and system readiness are satisfactory.

In practice, the pool of eligible trading venues remains relatively narrow. As of early 2026, the SFC had licensed only around a dozen VATPs, and not all of these may have the infrastructure or appetite to support trading of Tokenised Products. Product Providers seeking to offer secondary trading will therefore need to engage early with potential VATP partners and may find that the choice of platform is itself a material commercial consideration. The SFC's willingness to consider OTC arrangements on a case-by-case basis does, however, leave the door open for alternative execution models to develop over time.

By contrast, Switzerland's DLT trading facility licence (the first of which was granted to BX Digital by FINMA in March 2025) combines trading with on-chain settlement but restricts participation to regulated financial institutions, whereas the SFC's framework is designed from the outset to accommodate retail investor access. The UK FCA's October 2025 consultation on fund tokenisation (CP25/28) remains focused on primary market efficiency rather than on-exchange secondary trading of the kind envisaged by the SFC.

Fair pricing

SFC-licensed VATPs should implement effective risk management and supervisory controls to ensure fair pricing of Tokenised Products for on-platform trading. These controls should include:

• Alerting investors where the price to be executed would deviate significantly from the product's real-time or near real-time indicative net asset value ("NAV") per unit, based on a threshold reasonably set considering the product's features (the "Price Deviation Alert");
• Informing investors that they may choose to subscribe or redeem at NAV (i.e. to engage in primary subscription or redemption instead of secondary trading) and the resulting implications; and
• Implementing system controls, automated pre-trade and regular post-trade monitoring as set out in paragraph 11.13 of the VATP Guidelines, and other controls reasonably designed to prevent excessive price fluctuations (e.g. 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.

Similarly, where SFC-licensed corporations or registered institutions facilitate trading of Tokenised Products for their clients on SFC-licensed VATPs ("Connecting Brokers"), they should ensure that the Price Deviation Alert is displayed to investors and inform investors of the primary market alternative.

The SFC may request a demonstration of the trading interface, the Price Deviation Alert and/or other relevant interfaces.

Notably, the requirement for VATPs to display a real-time or near real-time indicative NAV per unit, typically updated at least every 15 seconds, is operationally demanding, particularly for products whose underlying assets trade in different time zones or are priced infrequently. Practitioners should also note the interplay between primary and secondary markets: an investor who receives a Price Deviation Alert may elect to subscribe or redeem at NAV through the primary market instead, which could affect secondary market liquidity and the economics of market making. This level of prescriptive, product-specific fair pricing regulation is distinctive. In the EU, tokenised fund units qualifying as transferable securities are governed by MiFID II best execution obligations rather than fund-specific pricing mechanisms, whilst Singapore's MAS, under its November 2025 tokenisation guide, does not mandate bespoke trading controls for tokenised fund products.

Liquidity provision

Product Providers should:

• Use their best endeavours to arrange that each Tokenised Product has at least one market maker, with at least one market maker giving not less than three months' notice prior to terminating the market making arrangement;
• Closely monitor secondary trading activities and liquidity, maintain close dialogue with market makers, establish appropriate business contingency plans, and take necessary remedial actions in the best interests of investors;
• Appoint distributors for their Tokenised Products, who should be SFC-licensed corporations or registered institutions, and are expected to process creation and redemption requests from third-party investors, save for certain remote scenarios; and
• Put in place arrangements with SFC-licensed VATPs to facilitate the transfer of Tokenised Products across primary and secondary markets (e.g. tokens created in the primary market can be readily traded in the secondary market, and tokens purchased in the secondary market can be redeemed in the primary market).

In turn, SFC-licensed VATPs should:

• Conduct due diligence on, and regularly monitor the performance of, all market makers admitted to their platforms against the agreed terms. VATPs should be reasonably satisfied that such market makers remain competent and properly resourced to discharge their market making functions;
• Ensure that all market makers admitted to their platforms 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;
• Liaise with market makers admitted to their platforms to rectify when they fall short of the obligations; and
• Set out in their arrangements with market makers the eligibility criteria, the obligations applicable to market making for Tokenised Products, and the contingency arrangements in the event that a market maker is no longer available.

The market making obligations draw heavily from established ETF practices, but the extension to a 24/7 trading environment introduces distinct operational challenges. Market makers will need to maintain continuous quoting capacity across evenings, weekends and public holidays, when the underlying assets of many funds are not actively trading and reliable pricing data may be limited. The three-month notice period before a market maker may terminate its arrangement provides an important buffer, but Product Providers should consider the practical difficulty of sourcing replacement market makers at short notice, particularly for less liquid products. This prescribed market making framework is more interventionist than other jurisdictions: Switzerland's BX Digital follows a conventional exchange-style model without fund-specific market maker appointment requirements, and the UK's fund tokenisation roadmap has not yet extended to secondary trading market making obligations.

Distributors and market makers should ensure compliance with applicable laws, rules, regulations and conduct requirements administered or issued by the SFC (and/or other regulatory authorities where applicable). Where remunerations and/or incentives are provided to market makers to support market making activities, the Product Providers and/or SFC-licensed VATPs should comply with all applicable laws and regulations to uphold market integrity and prevent market misconduct.

Disclosure requirements

The offering documents, including the product key facts statement, of a Tokenised Product offering secondary trading should clearly set out:

• The associated risks with secondary trading, such as liquidity and price deviation risks (potentially very thin trading and large premium/discount to NAV, particularly outside normal operating hours of the Hong Kong financial market and during weekends), price fragmentation risks (including different trading prices across different trading channels) and market maker reliance risks;
• Key information on the trading channel, including operational flow, settlement process and timing, pre-funding requirements, differences between the secondary and primary markets, and whether Tokenised Products can be traded interchangeably across trading channels. The offering documents should also set out the market making arrangements (including any incentive schemes) and indicative ranges of fees applicable to secondary trading, together with a remark directing investors to the websites of the relevant SFC-licensed VATPs for further details;
• The circumstances under which secondary trading may be suspended; and
• The list of market makers for the Tokenised Products (with a remark directing investors to a website for the latest list) and any affiliated entities of the Product Providers acting as market makers, along with disclosures on the associated potential conflicts of interest.

In addition, SFC-licensed VATPs and Connecting Brokers should maintain or provide access to online dedicated interfaces to:

• Disclose details of the secondary trading arrangements for the relevant Tokenised Products, including the trading channel, market making arrangements (including any incentive schemes provided by the Product Provider and/or SFC-licensed VATPs to market makers), eligibility criteria for market makers, fee schedules and price quotation/bid-ask spreads;
• Disseminate
• Real-time or near real-time indicative NAV per unit (typically updated at least every 15 seconds during trading hours); and
• Last NAV per unit of the Tokenised Products, with the data source and update frequency; and
• Prominently highlight to clients intending to participate in secondary trading the associated risks, including liquidity and price deviation risks (such as potentially very thin trading and large premium/discount to NAV, particularly outside normal Hong Kong financial market operating hours and during weekends), price fragmentation risks across different trading channels, and market maker reliance risks. Before onboarding clients for secondary trading of the Tokenised Products, SFC-licensed VATPs and Connecting Brokers should obtain confirmation from each client that they understand these risks.

The cumulative disclosure burden is considerable. Product Providers will need to update their offering documents and product key facts statements, whilst VATPs and Connecting Brokers must build and maintain dedicated online interfaces. Given that several of these disclosure items, such as real-time NAV dissemination and detailed market making disclosures, require ongoing system investment, market participants should factor the associated compliance and technology costs into their product planning at an early stage.

Notification obligations

Generally, Product Providers should give the SFC early alerts of any untoward circumstances relating to the Tokenised Products under their management, including without limitation, any issues which may adversely affect the operations, secondary trading and liquidity of their Tokenised Products (including receipt of any resignation notice of the last market maker). Product Providers should immediately notify the SFC and investors as soon as practicable if: (i) dealing in the Tokenised Products on the primary or secondary markets ceases or is suspended; or (ii) market making activities cease, are disrupted or are suspended. In such notification, Product Providers should include an assessment of the impact of the event on the Tokenised Products under their management, remedial actions and an appropriate contingency plan.

Prior consultation, application and approval

For new investment products that will have tokenisation features (primary dealing and/or secondary trading) and which require the SFC's authorisation, prior consultation with the SFC is mandated. For existing SFC-authorised investment products that will introduce tokenisation features, prior consultation and approval from the SFC are also required. The SFC will assess each application on a case-by-case basis and may provide further guidance or impose additional requirements where applicable. Product Providers should also engage in prior consultation with the SFC for any subsequent proposed material changes to the secondary trading arrangement previously approved by the SFC, such as trading mechanism, Price Deviation Alert, market making arrangement and addition of trading channels. Intermediaries, including SFC-licensed VATPs and those intending to engage in over-the-counter secondary trading, should notify and discuss their proposals with their case officers in the SFC prior to engaging in secondary trading business for the first time. If material changes are subsequently made to the arrangements communicated, they should also notify their case officers at the SFC and, where applicable, the HKMA.

The breadth of the prior consultation requirement gives the SFC significant discretion over the development of this market. In effect, no new secondary trading arrangement, and no material change to an existing one, can proceed without regulatory engagement. Whilst this approach allows the SFC to calibrate requirements on a product-by-product basis, it may also create lead-time uncertainty for product launches, and market participants should build sufficient regulatory engagement time into their project timelines. This case-by-case approval model is more hands-on than Singapore's technology-neutral approach, where tokenised fund products are generally subject to the same requirements as non-tokenised equivalents without separate pre-approval, and the UK's sandbox-driven model, which does not yet require product-specific pre-approval of this kind.

What this means for the tokenised products regime in HK

In the SFC's accompanying press release, the SFC indicated that the initial batch of products is expected to focus on tokenised money market funds, with the SFC to review their operation and consider expanding the product scope in due course.

Product issuers and intermediaries, including SFC-licensed VATPs, are encouraged to consult or notify the SFC beforehand on endeavours related to this regulatory framework.

The Circular is a significant step forward in Hong Kong's development as a digital assets hub. By opening up regulated, around-the-clock secondary trading for SFC-authorised fund products, the SFC has moved decisively beyond the traditional subscription and redemption model and created a framework that few other jurisdictions have yet attempted at this scale, let alone with retail investor access built in from the outset. The potential use of regulated stablecoins and tokenised deposits as trading media, as flagged in the SFC's accompanying press release, reinforces the ambition to embed tokenised funds within the broader Web3 ecosystem.

That said, the framework is operationally demanding. It layers ETF-style market making, real-time NAV transparency and price deviation safeguards onto a product structure that has historically operated without them, and requires a level of ongoing coordination between Product Providers, VATPs, market makers and distributors that goes well beyond the conventional fund manager–distributor relationship. Market participants should carefully review the Circular and assess its implications for their existing and planned tokenisation activities, factoring in the compliance, technology and operational costs of meeting these new requirements alongside the considerable commercial opportunities they present.