Hong Kong SFC Requires Flexible Leverage Structure for Leveraged and Inverse Products

Hong Kong's Securities and Futures Commission has issued a revised circular requiring leveraged and inverse products with capacity highly affected by market changes to use a flexible leverage structure. According to Odaily, leverage ratios can be adjusted daily within the existing limits of 2 times for leveraged products and minus 2 times for inverse products. Product providers may lower the target leverage ratio when necessary to manage these products during periods of high trading volume. The leverage ratio for the next trading day will be disclosed after the market close each day. The daily potential adjustment is also intended to reinforce that leveraged and inverse products are single-day products and are not suitable for holding longer than one day.