SFC — Securities and Futures Commission
Hong Kong markets regulator since 1989; Type 3 licence required for leveraged FX
- Max retail leverage
- No statutory cap
- Compensation limit
- HKD 500,000 per investor, covering exchange-traded products on Hong Kong's recognised markets
- Negative balance protection
- Not required
About the SFC
The Securities and Futures Commission was established in 1989 as Hong Kong's independent statutory markets regulator, operating today under the Securities and Futures Ordinance. It licenses corporations and individuals by regulated activity type, and the one that matters for retail forex is Type 3, leveraged foreign exchange trading. Obtaining it requires substantial paid-up share capital and liquid capital, responsible officers with demonstrable experience, and detailed systems and controls. The SFC assesses fitness and properness on an ongoing basis and publishes disciplinary outcomes against both firms and named individuals.
Hong Kong does not impose a blanket retail leverage cap on leveraged foreign exchange trading. The regulatory weight sits instead on who may offer the product at all and on the conduct standards they must meet. Licensed corporations must provide a compliant client agreement, give risk disclosures, assess client knowledge of derivative products, and follow the Code of Conduct on suitability where advice is given. Margin calls and forced liquidation policies must be documented, and the SFC has taken enforcement action over defective client agreements and inadequate margin controls.
Client money must be kept in segregated trust accounts with authorised financial institutions under the Client Money Rules, paid in within prescribed timeframes, with tight limits on when it may be withdrawn. Hong Kong does have an Investor Compensation Fund paying up to HKD 500,000 per investor, but its scope is important: it covers defaults involving exchange-traded products on Hong Kong's recognised markets, so over-the-counter leveraged foreign exchange positions with a Type 3 firm fall outside it. Disputes can be taken to the Financial Dispute Resolution Centre, with the SFC handling misconduct separately.
Why we rate it tier 1
The Type 3 leveraged foreign exchange licence carries heavy liquid capital requirements and a demanding fitness assessment, backed by strict Client Money Rules and active enforcement. Note that the Investor Compensation Fund covers exchange-traded products, not OTC leveraged FX.
High minimum capital, enforced conduct rules, a public register that is genuinely policed, and an independent complaints or compensation route that pays out when a firm fails. These are the licences worth paying a wider spread for.
SFC protections at a glance
| Full name | Securities and Futures Commission |
|---|---|
| Jurisdiction | Hong Kong |
| Region | Asia-Pacific |
| Established | 1989 |
| Maximum retail leverage | No statutory cap |
| Leverage regime | There is no across-the-board retail leverage cap for leveraged foreign exchange trading. The controls are the Type 3 licensing requirement, substantial liquid capital obligations and SFC margin and client agreement rules. |
| Investor compensation scheme | Investor Compensation Fund |
| Compensation limit | HKD 500,000 per investor, covering exchange-traded products on Hong Kong's recognised markets |
| Negative balance protection | Not required — Negative balance protection is not mandated for leveraged foreign exchange trading, so the treatment of debit balances depends on the licensed firm's client agreement. |
| Client-fund segregation | Licensed corporations must hold client money in segregated trust accounts with authorised financial institutions under the Client Money Rules, with prescribed timeframes for payment in and restrictions on withdrawals. |
| Complaints route | Complain to the licensed corporation, then to the Financial Dispute Resolution Centre for eligible monetary claims, with the SFC handling misconduct complaints separately. |
| Public register | Public Register of Licensed Persons and Registered Institutions (apps.sfc.hk/publicregWeb) |
What to check on the Public Register of Licensed Persons and Registered Institutions
- 1Search the firm in the SFC public register of licensed persons at apps.sfc.hk and note its central entity number.
- 2Confirm the licence includes Type 3 leveraged foreign exchange trading, not only Type 1 or Type 2.
- 3Check the licence status is active and read the listed conditions.
- 4Check the responsible officers named and their individual licence records.
- 5Review the SFC enforcement news and public disciplinary actions for the firm.
Register: apps.sfc.hk/publicregWeb. Always navigate to the register from the regulator's own domain rather than a link supplied by the broker.
Brokers on PipDig regulated by the SFC
None of the brokers currently reviewed on PipDig hold a SFC licence. That is not a mark against the authority — our review coverage follows where readers actually open accounts, and it changes as we test more firms.
SFC FAQ
Does the Investor Compensation Fund cover my forex account?
Generally no. The fund pays up to HKD 500,000 per investor for defaults relating to exchange-traded products on Hong Kong's recognised markets. Over-the-counter leveraged foreign exchange traded with a Type 3 licensed corporation falls outside that scope. Your protection there comes from the Client Money Rules requiring segregated trust accounts and from the firm's capital requirements.
What is a Type 3 licence?
Type 3 is the regulated activity of leveraged foreign exchange trading under the Securities and Futures Ordinance. A firm needs it to deal in margin FX with Hong Kong clients, and it carries substantial paid-up and liquid capital requirements plus experienced responsible officers. A firm holding only Type 1 dealing in securities is not authorised to offer leveraged foreign exchange.
Is there a leverage limit in Hong Kong?
There is no statutory retail cap for leveraged foreign exchange trading. Limits are set by the licensed corporation within its own risk framework, and the SFC expects documented margin call and liquidation policies. The regulatory filter is the difficulty of obtaining and keeping a Type 3 licence rather than a prescribed maximum ratio.