Response to SFC's Consultation paper on proposed limits for certain fees following implementation of an uncertificated securities market in Hong Kong
Release Date: 2025-04-23
| The Securities and Futures Commission | Submitted to SFC website |
| 54/F One Island East | |
| 18 Westlands Road, Quarry Bay |
Re: Consultation paper on proposed limits for certain fees following implementation of an uncertificated securities market in Hong Kong
Question 1：
Do you have any comments on the proposal that any USI set-up fee charged by an ASR to an investor should not exceed $50 per USI Facility? If so, please elaborate.
Question 2：
Do you have any comments on the proposed parameters for such limit as discussed in paragraphs 18(b) and 19 above? If so, please elaborate.
Answer:
To encourage early participation and lower the barrier for individual investors entering the paperless market, the market has introduced a one-time low fee (HKD $50) to facilitate a rapid transition. Additionally, to ensure fairness, uniform standards apply to all application methods (online and offline), preventing unfairness due to channel differences.
In terms of cost control, most investors only need 1 to 2 facilities, with the total cost ranging from HKD $50 to $100, which is relatively low for individuals. The reasonable tiered service design allows basic service limits to be set and institutions to offer express services with flexible pricing, thus balancing efficiency and market demand.
However, there is a risk of cost-shifting by institutions. If the actual cost for securities registration agencies exceeds HKD $50, they might transfer it through other service charges, undermining the price cap's effectiveness. On the other hand, non-individual investors might face unfair situations as the USI setup fee for corporate entities has no cap, potentially leading to higher costs and affecting corporate willingness to participate.
Moreover, there is insufficient flexibility. The basic service is required to be completed within 5 working days. If market demand surges, it may lead to processing delays, indicating a need for more tiered options to accommodate different market demands.
Question 3：
Do you have any comments on the proposal that any dematerialisation fee charged by an ASR to an investor should not exceed the higher of: (i) $5 per title instrument; and (ii) $20 per request per stock/line of securities? If so, please elaborate.
Question 4：
Do you have any comments on the proposed parameters for such limit as discussed in paragraphs 24(b) and 25 above? If so, please elaborate.
Answer:
In terms of cost transparency, the market adopts a fee structure based on the number of documents, making calculations clearer and avoiding complexity, which helps investors estimate costs more easily. Additionally, to encourage the dematerialization of the market, the minimum fee is set at HKD $20, which is friendly to small investors (such as those holding 1 to 4 documents), promoting the overall paperless transition of the market.
Regarding risk control, the market retains flexible charging methods for non-individual entities to accommodate complex processes (such as companies requiring additional verification of authorization documents). However, for large holders, if an individual holds more than 50 documents (such as through long-term dividend reinvestment), the fee of HKD $250 might be considered an excessive burden.
Moreover, the setting of the minimum fee has sparked some controversy. For investors holding only one document, the minimum fee of HKD $20 is eight times the current fee (HKD $2.5 per document), which may cause dissatisfaction in the short term.
Lastly, the issue of time costs remains inadequately covered. The anti-counterfeiting process of document verification is time-consuming, and if institutional costs rise, this could affect service quality or necessitate other hidden charges to compensate.
Question 5：
Do you have any comments on the proposal that:
(a) no T&R fee should be charged by an ASR in respect of any transfer to investors from HKSCC-NOMS; and
(b) for all other transfers of prescribed securities, any T&R fee charged by an ASR should not exceed the higher of: (i) 0.02% of the transaction value; and (ii) $20 per transfer request?
If so, please elaborate.
Question 6：
Do you have any comments on the proposed parameters for such limit as discussed in paragraphs 28(c) and 29 above ? If so, please elaborate.
Answer:
In terms of fair pricing, the market adopts an ad valorem fee structure (0.02%) linked to transaction size, preventing small transactions from being squeezed by high fixed fees while ensuring that large transactions bear reasonable costs. Additionally, to encourage direct holding, the market exempts transfer fees for Hong Kong clearing agents, reducing the cost for investors to withdraw securities from the central system and promoting a paperless holding model.
The market has also established unified standards applicable to all securities (whether participating in paperless transactions or not), which reduces confusion and simplifies operational processes. However, the new 0.02% fee rate differs significantly from the historical per-cert fee (HKD $2.5 per certificate), necessitating investor education to adapt to the new pricing model.
For large transactions, costs may increase. Fees for transactions over HKD $100,000 might exceed current standards; for example, a transaction of HKD $100 million would require a HKD $2,000 fee, potentially causing dissatisfaction among institutions. Furthermore, the execution process requires real-time acquisition of securities market price data, which may increase system development costs and technical risks.
In conclusion, the digitization of Hong Kong's financial market will be promoted, enhancing not only efficiency but also providing environmental benefits. Additionally, by implementing a reasonable price cap mechanism, a balance of interests can be achieved between investors and institutions, encouraging early market participation. Unified standards will simplify operational processes and reduce unnecessary confusion.
Non-individual investors, such as corporations, may face higher cost burdens due to the absence of a fee cap. Certain provisions, such as the minimum fee, still require further justification of their reasonableness. Meanwhile, supporting measures, such as technological upgrades and investor education, are needed to ensure a smooth market transition.
Before finalizing the policy, it is recommended that the Securities and Futures Commission conduct a more detailed cost assessment on the disputed points mentioned above and engage in thorough communication with stakeholders. This will ensure that the policy is not only forward-looking but also practically implementable.
If you have any questions or need further information, please feel free to contact me (Phone: / Email: )
Your sincerely,
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association