Regulation & Client ProtectionSFCSecurities and Futures Commission
SFC Hong Kong
Hong Kong's Securities and Futures Commission, which licenses leveraged foreign exchange trading as a Type 3 activity.
What SFC Hong Kong means
The Securities and Futures Commission is Hong Kong's independent statutory regulator for the securities and futures markets. It licenses firms and individuals across numbered regulated activities, and leveraged foreign exchange trading is Type 3, distinct from Type 1 dealing in securities and Type 2 dealing in futures contracts. The public register of licensed persons shows the exact activity types each corporation holds, its responsible officers and any past disciplinary action, which matters because a firm licensed only for Type 1 is not permitted to offer margin forex.
Licensed corporations must meet liquid capital and paid-up share capital requirements, keep client money in segregated trust accounts with authorised institutions and pay it out only on the client's written direction, comply with the Code of Conduct including suitability, best execution and disclosure of monetary benefits, and appoint responsible officers approved by the SFC. The regulator publishes enforcement outcomes and maintains an alert list of unlicensed entities and suspicious websites targeting Hong Kong investors.
Hong Kong does not impose an ESMA-style retail leverage cap on leveraged foreign exchange, and negative balance protection is not a statutory requirement, so terms vary by firm and must be read in the client agreement. The Investor Compensation Fund pays up to 500,000 HKD per investor but covers products traded on the Hong Kong Stock Exchange and Futures Exchange, so over-the-counter margin forex positions generally fall outside it. Segregation, not compensation, is therefore the main safeguard against a licensee's failure.
Worked example
Before opening a margin forex account, a Hong Kong client checks the SFC public register and confirms the corporation holds Type 3 licensing rather than Type 1 alone. If only Type 1 appears, the firm is not licensed for the product it is marketing.
Related terms
- Investor Compensation SchemeA statutory fund that pays eligible clients a capped amount when a regulated firm fails and cannot return their money.
- Client Money RulesThe detailed regulatory regime governing how a firm must hold, reconcile and protect money belonging to its clients.
- Leverage CapA regulatory ceiling on the leverage a broker may offer retail clients, varying widely between jurisdictions.
- Segregated AccountsClient money held in bank accounts separate from the broker's own funds, so it is not available to the firm's creditors.
- Negative Balance ProtectionA rule or policy under which a client's losses cannot exceed the funds in their account, so no debt is owed to the broker.
Frequently asked questions
What does SFC Hong Kong mean in forex trading?
Hong Kong's Securities and Futures Commission, which licenses leveraged foreign exchange trading as a Type 3 activity.
How does SFC Hong Kong work in practice?
Licensed corporations must meet liquid capital and paid-up share capital requirements, keep client money in segregated trust accounts with authorised institutions and pay it out only on the client's written direction, comply with the Code of Conduct including suitability, best execution and disclosure of monetary benefits, and appoint responsible officers approved by the SFC. The regulator publishes enforcement outcomes and maintains an alert list of unlicensed entities and suspicious websites targeting Hong Kong investors.
What is an example of SFC Hong Kong?
Before opening a margin forex account, a Hong Kong client checks the SFC public register and confirms the corporation holds Type 3 licensing rather than Type 1 alone. If only Type 1 appears, the firm is not licensed for the product it is marketing.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.