The Hong Kong Securities and Futures Commission has optimized the regulatory framework for single-day leverage and inverse products to ensure orderly trading in the market.

On July 24, the Securities and Futures Commission (SFC) of Hong Kong issued a revised circular aimed at optimizing the regulatory framework for leveraged and inverse products to allow product providers to more flexibly manage their products, while also reminding investors of the characteristics of these products as single-day trading tools. The market for Leveraged and Inverse (L&I) Products in Hong Kong has grown significantly since early 2026, mainly driven by the rapid development of Single Stock Leveraged and Inverse Products. As a result, the operation of these products increasingly relies on the ecosystem related to the underlying stocks to maintain the target leverage exposure. In the rapidly changing market environment, the SFC will require leveraged and inverse products highly sensitive to market changes to adopt a flexible leverage structure. Under this structure, the leverage factor can be adjusted daily within the existing limits (i.e. leverage products at 2x, inverse products at -2x). Therefore, product providers can lower the target leverage factor of these products when necessary, providing greater flexibility to manage products during periods of high trading volume. The leverage factor for the next trading day will be disclosed after the market closes each day. The potential daily adjustments to the leverage factor will also deepen investors' understanding of the nature of leveraged and inverse products as single-day products, reminding investors that these products are not suitable for holding longer than one day. This optimization measure adopts a balanced approach by disclosing the target leverage factor daily and reducing the risk of significant tracking error in rapidly changing market conditions, thereby supporting the orderly operation of leveraged and inverse products in different market conditions and maintaining their effectiveness as single-day trading and hedging tools for investors. Ms. Joanne Wu, Executive Director of Investment Products at the SFC, stated, "These optimization measures are timely adjustments made in response to the evolving market environment, aimed at supporting sustainable market development while ensuring appropriate investor protection measures. The updates also help investors gain a deeper understanding of the nature and complexity of leveraged and inverse products as single-day products. Before investing, investors should understand the characteristics and risks of these products and differentiate them from products suitable for overnight or long-term holding, as well as carefully assess whether these products are suitable for their investment needs." To increase transparency, the SFC also requires leveraged and inverse product providers to publish the target leverage factor for the next trading day on their product websites and the HKEX website after the market closes each day, and their product names should also reflect the flexible leverage features and maximum leverage factors. The SFC reminds investors that leveraged and inverse products are not designed for holding longer than one day, as their performance may significantly deviate from that of the underlying assets in this case. To assist investors in understanding these complex products, the SFC has issued information charts with the theme "D-A-I-L-Y" to provide a checklist for investors and urges them to conduct daily evaluations when trading leveraged and inverse products.