SFC Scrutinises Leveraged FX Trading in Hong Kong
- The regulator has outlined that leveraged forex trading might not be for everyone.

This Thursday, the Securities and Futures Commission (SFC) published a report on the leveraged foreign exchange trading (LFET) activities conducted by licensed corporations from the period between January 2018 until the 31st of December, 2018.
In particular, the report focuses on a survey from the Hong Kong regulator, which found that 98 percent of active LFET clients were retail investors, and more than 99 percent of turnover in the LFET market was rolling spot Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term contracts.
The survey data covered the 32 firms licensed for Type 3 regulated activity in Hong Kong - leveraged FX trading, which reported on their LFET activities in 2018, the statement from the regulator said.
For more complex FX products, turnover was quite low, such as options and forward contracts. All LFET products were traded on an over-the-counter basis. As part of the survey, a selection of brokers was chosen to give more detailed information.
According to the Hong Kong regulator, the selected brokers made up 77 percent of market turnover, and their clients accounted for 41 percent of total active LFET clients. From these brokers, more than 60 percent of their LFET clients made net trading losses, with some investors incurring losses of more than $1 million.
SFC: leveraged FX trading might not be for everyone
Commenting on the survey results, Ashley Alder, the SFC's Chief Executive Officer, said in the statement: "Leveraged foreign exchange trading may not be suitable for everyone. It is done on a margin basis and these products may involve complex or non-standard features. Even experienced investors may suffer huge losses in such trading, especially in times of high market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.
"Brokers should ensure that their clients fully understand the nature and risks of these products and have sufficient financial resources to assume the risks and bear the potential losses."
This Thursday, the Securities and Futures Commission (SFC) published a report on the leveraged foreign exchange trading (LFET) activities conducted by licensed corporations from the period between January 2018 until the 31st of December, 2018.
In particular, the report focuses on a survey from the Hong Kong regulator, which found that 98 percent of active LFET clients were retail investors, and more than 99 percent of turnover in the LFET market was rolling spot Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term contracts.
The survey data covered the 32 firms licensed for Type 3 regulated activity in Hong Kong - leveraged FX trading, which reported on their LFET activities in 2018, the statement from the regulator said.
For more complex FX products, turnover was quite low, such as options and forward contracts. All LFET products were traded on an over-the-counter basis. As part of the survey, a selection of brokers was chosen to give more detailed information.
According to the Hong Kong regulator, the selected brokers made up 77 percent of market turnover, and their clients accounted for 41 percent of total active LFET clients. From these brokers, more than 60 percent of their LFET clients made net trading losses, with some investors incurring losses of more than $1 million.
SFC: leveraged FX trading might not be for everyone
Commenting on the survey results, Ashley Alder, the SFC's Chief Executive Officer, said in the statement: "Leveraged foreign exchange trading may not be suitable for everyone. It is done on a margin basis and these products may involve complex or non-standard features. Even experienced investors may suffer huge losses in such trading, especially in times of high market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.
"Brokers should ensure that their clients fully understand the nature and risks of these products and have sufficient financial resources to assume the risks and bear the potential losses."