The Securities and Futures Commission (SFC) in the Hong Kong Special Administrative Region has approved the world’s first secondary trading of tokenized public funds, marking an important milestone in advancing Hong Kong’s digital asset trading ecosystem.
The SFC in its Monday statement said it had approved the secondary trading of two existing SFC-authorized tokenized money market funds, available around-the-clock from that day.
China Asset Management (Hong Kong) announced it will partner with Panthertrade (Hong Kong) - an SFC-licensed virtual asset trading platform (VATP) wholly-owned by Futu Holdings - to launch the world’s first retail secondary trading service. The two funds it will deal with are the ChinaAMC HKD Digital Money Market Fund and the ChinaAMC USD Digital Money Market Fund.
In April, the SFC introduced a new regulatory framework to pilot secondary trading of tokenized SFC-authorized funds on SFC-licensed VATPs by setting out the requirements and safeguards for such trading, covering the operation of the trading channel, fair pricing, liquidity provision and disclosure.
“Secondary trading of tokenized money market funds marks an important milestone in the SFC’s ongoing efforts to advance Hong Kong’s digital asset development by adding an important building block – 24/7 trading capability – to Hong Kong’s evolving tokenization ecosystem. We will continue to strengthen Hong Kong’s position as a pioneer in tokenization by facilitating responsible innovation while safeguarding investors,” said Elisa Ng Ka-li, investment products executive director at SFC.
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The SFC said the interaction between tokenized funds and tokenized money on digital rails could support more efficient trade settlement and asset mobility. Investors could sell their tokenized assets on VATPs on an around-the-clock basis and transfer their trading proceeds instantly to chase other investment opportunities.
With the first batch of products focused on tokenized money market funds, the SFC said it will closely monitor trading activities and consider broadening the product’s scope over time.
Katie He, executive director and head of strategic business at ChinaAMC (HK), said this product innovation demonstrates Hong Kong's institutional advantages and market execution capabilities in compliant digital financial innovation, balancing investor protection, technological feasibility, and commercial sustainability while promoting the implementation of financial innovation.
For investors to buy and sell already-issued fund units in the secondary market involves the transfer of existing units between buyers and sellers rather than submitting subscriptions or redemptions to the fund for each transaction. This means the fund manager does not need to simultaneously buy or sell the underlying assets for every secondary market transaction, which allows secondary market trades to be conducted outside of traditional trading hours.
The trading system incorporates iNAV (real-time reference net asset value) independently calculated by a third-party institution and disclosed around-the-clock, allowing investors to understand the underlying market price at any time during trading.
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The product meets the needs of cross time-zone treasury management companies while providing additional options for retail investors with immediate fund allocation needs, said He.
In the future, ChinaAMC (HK) will continue to expand into more asset classes, such as bonds and commodities, to further integrate on-chain and off-chain investment, trading, and settlement systems. The asset manager will also strive to deepen integration with compliant digital currencies, including compliant stablecoins and central bank digital currencies, He added.
Steve Zeng, managing director of Futu Holdings, added that secondary market prices are market-driven as they are determined by free matching between buyers and sellers, and significant deviations from the underlying net asset value are possible. However, the trading platform has a mechanism consistent with the Hong Kong Stock Exchange's volatility control mechanism (VCM) to limit extreme volatility.
