Hong Kong - A Myriad of Changes
Post-trade reform in Hong Kong is happening at a relentless pace as local regulators and Financial Market Infrastructures (FMIs) take aim at proxy voting, asset safekeeping and trade settlement practices.
In this fifth edition of our “Where Can We Take You” series, Marcello Topa, Global Head of Advocacy for Investor Services at Citi, speaks with Amit Raghunath, Hong Kong Custody Head, about these changes, and how they are impacting the local market.
Marcello Topa |
Amit Raghunath |
Proxy voting reform has been an intense area of focus in Hong Kong. What exactly is happening?
Raghunath: It certainly has! A long-standing challenge in Hong Kong – until fairly recently – was that proxy events did not have a mandatory record date. Typically, it is a fairly standard market practice for issuers to set a record date either one or two days before a proxy voting deadline or ahead of receiving entitlements. However, if there are multiple proxy events without a mandated record date, this could lead to multiple reconciliations and eligibility revisions, creating operational challenges for issuers, intermediaries and investors alike. Together with the Asia Securities Industry & Financial Markets Association (ASIFMA), we flagged some of these challenges to Hong Kong Exchanges & Clearing LTD (HKEX), who have since taken decisive action.
In December 2024, HKEX published its Review of Corporate Governance Code and Related Listing Rules – confirming that from July 1, 2025, issuers must set a record date for proxy voting and when receiving entitlements. These changes will provide investors and their custodians additional time during the proxy voting process, which will help address some of the operational inefficiencies, i.e. by reducing the number of reconciliations, revisions of eligibility and revised instructions.
Other meaningful market changes are taking place in Hong Kong too. Could you provide some insights into these?
Raghunath: There are quite a few reforms in the pipeline! Let’s start with the Uncertificated Securities Market (USM) initiative. In Hong Kong, some investors, i.e. those not trading securities electronically on HKEX, are issued paper certificates denoting ownership of securities. Not only does this fall short of best practices around asset safekeeping, but it also means that the process of transferring the legal title is very time-consuming, often taking up to 10 business days. The Hong Kong Securities and Futures Commission (SFC) is now making it compulsory for investors to hold prescribed securities in their own names and in uncertificated form, thereby giving them direct legal ownership of their securities electronically1 , using platforms operated by approved securities registrars and connected to Hong Kong Securities Clearing Company Limited (HKSCC).
From early 2026, all new issues will need to be paperless, i.e. electronic, while for existing securities, issuers must take various steps to allow investors to make the conversion. The USM initiative will give investors better protection, facilitate more efficient trading, and drive better automation across the intermediary chain.
Industry engagement has been a big priority for us. We have collaborated with HKEX and the registrars on the new flow design. We are also adapting our systems and processes, so that we can support clients with the changes. For instance, at some point, HKEX will stop providing immediate credit options to custodians. These credit options were available even in scenarios when HKEX had not verified whether the certificates and related documents were accurate. This old model created an element of risk for custodians, as investors could sell their shares immediately, but if an issue was discovered, it was the custodian’s responsibility to return the shares to HKEX. From now on, investors will need to deposit their certificates in advance before selling on their shares. If investors want to sell shares quickly, they will need to use the registrar express service, which carries a few extra charges. In short, the USM increases operational efficiency between the custodians, the registrar and HKEX and reduces risk for all parties.
We understand there are quite a few structural changes happening in the world of multi—counter eligible securities. Please elaborate on this.
Raghunath: HKSCC is streamlining the settlement process for multi-counter eligible securities, e.g. dual counter securities (DCS) and multi-counter Exchange Traded Funds (ETFs) in the Central Clearing and Settlement System (CCASS).
This comes after HKEX received feedback from market participants about the Dual Counter Model, a new mechanism introduced in 2023 which allows investors to trade Hong Kong listed securities in either HKD or RMB. In particular, investors were not satisfied with the inter-counter transfer model for DCS as clearing and settlement were performed separately for each trading counter under a Dual Tranche Dual Counter model, requiring manual conversion from a systems perspective and separate ISINs for their operation.2
In June 2025, HKSCC adopted a single tranche multiple counter arrangement for multi-counter eligible securities in CCASS. This allows trading in these products to become more scalable, whilst also eliminating the need for both inter-counter transfers of multi counter eligible securities in CCASS and multiple ISINs. To support clients, we are helping them convert the stock codes on all of their positions and outstanding trades. We have also worked closely with our fund administration colleagues to provide solutions for fund clients when calculating NAVs for different counters.
Settlement efficiency does seem to be a strategic priority for market participants in Hong Kong. What have been the big developments here?
Raghunath: In response to growing client demand for faster settlements, i.e. to support efficient collateral management and expeditious trade settlement confirmation for reporting purposes, we made a number of improvements to our post-trade instruction and settlement processing capabilities. In 2023, we went live with a new automated settlement solution in Hong Kong. By having a robotic process automation (RPA) module that connects directly with CCASS, clients were able to benefit from automation, and real-time settlement status updates, resulting in timelier and more efficient settlements, together with enhanced operational resilience.
As with many markets, Hong Kong is working towards a T+1 settlement cycle, but the precise date for its implementation is yet to be publicly confirmed. HKEX has advised that its post-trade systems will be technically ready to support a T+1 settlement cycle by the end of 2025, although this will not impact market operations or require any action from clients for now. They have recently published a discussion paper “Accelerated Settlement for the Hong Kong Cash Market”, looking at the potential implications of T+1. The paper outlined the benefits and challenges of T+1 and invited the industry to provide any feedback to HKEX.
Citi has extensive experience with helping firms navigate the T+1 transition, i.e. FX/securities lending support, provision of credit lines, supporting the streamlined ETF creation and redemption process, etc, in India and more recently in North America. Together with our automated settlement solution and real-time tracking of trade matching capabilities in Hong Kong, we are well-positioned to assist clients in the local market, as and when T+1 takes shape.
Related Stories
