HKEX: Hong Kong will transition to a paperless securities market starting in 2026, advancing the modernization process of the capital market.

HKEX has issued a document indicating that Hong Kong will transition to a paperless securities market (USM) as early as 2026, marking an important milestone in enhancing the accessibility, resilience, and competitiveness of the Hong Kong market. USM not only reduces the complexity of trading and post-trade processes but also builds investor confidence through clearer information, enhancing the attractiveness of the Hong Kong market to a wide range of participants. For investors, simplified processes and clearer information mean lower costs, fewer delays, and increased certainty, highlighting Hong Kong's role as a hub connecting capital and opportunities. HKEX will continue to implement various market optimization measures to provide better services and experiences to investors, companies, and participants worldwide and consolidate Hong Kong's position as a leading international financial center. USM drives market modernization The introduction of USM will modernize market operations, allowing investors to hold and manage securities more efficiently in a digital format under their own names. Under the USM system, securities listed on or to be listed on HKEX will eliminate paper documents, reduce manual operations, and operate entirely in a digital mode, making Hong Kong's financial market infrastructure more efficient. To support the implementation of USM, HKEX will introduce new securities custody procedures, adjust fee structures accordingly, collaborate closely with the Securities and Futures Commission (SFC), Hong Kong Securities and Clearing Limited, and other stakeholders, adhere to global standards, and make interactions between investors and companies faster and more efficient. Benefits of USM for the market Implementing USM will bring significant benefits to the Hong Kong market. In the future, investors will be able to hold securities in their own names and in digital form, making it easier to manage and trade securities. The existing Central Clearing and Settlement System (CCASS) agent structure will be retained. Securities held by investors through CCASS will continue to be registered in the name of Hong Kong Securities Clearing Limited, maintaining the level of service to participants while significantly shortening the securities transfer and registration process to improve operational efficiency. By optimizing post-trade system facilities, eliminating risks associated with paper processes, and reducing delays in physical operations, settlement processes can be shortened, ultimately enhancing market capacity, processing speed, and efficiency. For issuers, investors holding securities in their own names can enhance transparency, facilitate communication and interaction, and help strengthen corporate governance. As the name implies, USM will reduce the carbon footprint associated with printing, transporting, and storing paper documents, eliminating the need for additional paper in major workflows and promoting sustainable development in Hong Kong. USM lays the foundation for future market optimization measures, including paperless reporting, more convenient electronic communications, smarter post-trade solutions, and a simplified board lot framework. Preparing for USM Implementing USM requires industry-wide collaboration, with listed securities gradually transitioning to participating securities. Issuers will announce their transition to USM in due course. During the transition period, paper and paperless securities holdings will operate in parallel until the full transition to a paperless securities market to ensure market readiness and uninterrupted daily operations. HKEX will work closely with intermediaries and issuers to plan and implement necessary system optimizations on a large scale, while arranging exercises for market participants to familiarize themselves with the upgraded infrastructure and operational processes. At the same time, Hong Kong will adjust fee structures to make charges simpler, fairer, and more predictable, ensuring that operating costs align with the needs of a digitalized operation and support sustainable market development. In recent years, HKEX has implemented several market optimization measures to make trading more convenient and increase market liquidity. The severe weather trading arrangement launched in September 2024 ensures that the Hong Kong market opens on seven severe weather trading days, avoiding previous disruptions to international investors trading through Hong Kong due to market closures. The new stock pricing mechanism reform implemented in August 2025 also improves the pricing process for new stocks, enhancing Hong Kong's appeal as a fundraising center.