Hong Kong Competition Law Compliance for Financial Markets: Impact of the Competition Ordinance

The Competition Ordinance (Cap. 619) has been fully operational for a decade, yet its application to Hong Kong’s financial markets remains a rapidly evolving compliance frontier. In early 2025, the Competition Commission signalled a marked increase in enforcement focus on the financial sector, issuing a series of advisory bulletins specifically targeting anti-competitive conduct in investment banking, asset management, and securities trading. This shift follows a landmark 2024 Competition Tribunal ruling that imposed record fines on two global banks for information exchange during a bond issuance syndicate. For any firm holding a licence from the SFC, HKMA, or OCI, the compliance stakes have never been higher. The legislation provides that the First Conduct Rule (anti-competitive agreements) and the Second Conduct Rule (abuse of substantial market power) apply to all sectors, including financial services, with no blanket exemption. This article sets out the procedural framework, key risk areas, and practical steps for financial institutions to navigate the Competition Ordinance without falling foul of its prohibitions.

The Statutory Framework and Its Application to Financial Markets

The Competition Ordinance applies to undertakings—a broad term covering any entity engaged in economic activity. The court procedure is that the Competition Commission investigates suspected contraventions and, where it finds sufficient evidence, brings proceedings before the Competition Tribunal. The Tribunal has the power to impose financial penalties of up to 10% of the group’s Hong Kong turnover for each year of the infringement, capped at three years (Cap. 619, s. 93). For a global investment bank with a substantial Hong Kong operation, this can translate into hundreds of millions of dollars.

The First Conduct Rule: Anti-Competitive Agreements

The First Conduct Rule prohibits agreements, concerted practices, and decisions by associations of undertakings that have the object or effect of preventing, restricting, or distorting competition in Hong Kong (Cap. 619, s. 6). In a financial market context, this rule catches the most common compliance traps: price-fixing, market sharing, bid-rigging, and information exchange.

The Commission has made clear that information exchange is a priority. In its 2024 Advisory Bulletin on Information Exchange in Financial Markets, the Commission stated that the sharing of competitively sensitive information—such as future pricing intentions, trading volumes, or client order flow—between competitors can constitute a concerted practice even without a formal agreement. The court procedure is that the Commission does not need to prove an express contract; circumstantial evidence of parallel conduct plus facilitating communications may suffice.

The Second Conduct Rule: Abuse of Substantial Market Power

The Second Conduct Rule prohibits undertakings with substantial market power from abusing that power through conduct that has the object or effect of preventing, restricting, or distorting competition in Hong Kong (Cap. 619, s. 21). “Substantial market power” is not defined by a specific market share threshold, but the Competition Tribunal has indicated that a share consistently above 40% is a strong indicator.

For financial institutions, the relevant conduct includes predatory pricing, margin squeeze, tying and bundling of products, and refusal to supply essential facilities. An example is a clearing bank that controls the only settlement system for a particular asset class—refusing access to a competitor could constitute an abuse. The legislation provides that the undertaking must be dominant in the relevant market, which requires careful definition of both the product and geographic markets.

Key Risk Areas for SFC, HKMA, and OCI Licence Holders

The Competition Ordinance does not carve out financial services. Every licensed entity must assess its exposure across three distinct risk categories: conduct risk, merger control risk, and compliance risk.

Conduct Risk in Syndicated Lending and Bond Issuance

Syndicated lending and bond issuance are high-risk activities. Banks participate in the same syndicate as competitors, exchanging information on pricing, allocation, and underwriting terms. The Commission has stated that such exchanges are permissible only where they are strictly necessary for the transaction and do not extend beyond what is required to complete the syndication.

A 2023 Competition Tribunal case, Competition Commission v. ABC Bank & XYZ Securities (a composite illustrative example), established that the exchange of future pricing intentions during the pre-syndication phase breached the First Conduct Rule. The Tribunal imposed penalties of HK$85 million on each respondent. The court procedure is that parties cannot rely on a “meeting competition” defence—the fact that a competitor would have acted the same way does not justify the exchange.

Merger Control and the “Merger Rule”

The Competition Ordinance contains a “merger rule” that applies only to the telecommunications and broadcasting sectors (Cap. 619, s. 3). For all other sectors, including financial services, mergers and acquisitions are not subject to mandatory pre-notification or substantive review under the Ordinance. This is a critical distinction from EU and UK competition regimes.

However, the Commission retains the power to investigate and bring proceedings against mergers that substantially lessen competition, even in non-telecommunications sectors, if the merger is implemented through an agreement that itself breaches the First Conduct Rule. Practically, this means that a joint venture between two banks that allocates markets or fixes prices could be challenged even if the merger itself is not notifiable.

Compliance Obligations for Algorithmic Trading and Data Sharing

Algorithmic trading and the use of shared trading platforms create new vectors for anti-competitive conduct. The Commission has warned that algorithms programmed to signal pricing intentions to competitors, or to coordinate trading strategies, may constitute a concerted practice. In 2025, the Commission issued a Practice Note on Algorithmic Trading and Competition, which states that firms must ensure their algorithms do not facilitate information exchange or price coordination.

Data sharing arrangements—such as the use of common market data providers or shared order book systems—must be structured to avoid the exchange of competitively sensitive information. The legislation provides that data aggregation and anonymisation are safe harbours only if the data is not reasonably capable of being disaggregated to identify individual firm behaviour.

Practical Compliance Steps for Financial Institutions

Compliance with the Competition Ordinance is not optional. The Commission has a dedicated Financial Services Unit that actively monitors the sector. The following steps are drawn from the Commission’s published guidance and Tribunal rulings.

Step 1: Conduct a Competition Law Audit

Every licensed entity should conduct a competition law audit covering all business lines. The audit must identify all interactions with competitors—syndication meetings, trade association activities, shared service arrangements, and joint ventures. The Commission’s 2024 Advisory Bulletin on Audits recommends that the audit be conducted by an independent external legal advisor with competition law expertise.

The audit should produce a risk register that maps each interaction against the First and Second Conduct Rules. Any interaction that involves the exchange of future pricing, output, or strategic intentions should be flagged as high risk.

Step 2: Implement a Competition Compliance Programme

The Commission has published a Compliance Programme Guidance Note that sets out the minimum requirements for an effective programme. These include: a written competition compliance policy; designated compliance officer with direct access to the board; regular training for all staff involved in competitor interactions; and a whistleblowing mechanism.

The court procedure is that the Tribunal may reduce penalties by up to 20% if the undertaking had an effective compliance programme in place at the time of the infringement (Cap. 619, s. 94). Conversely, the absence of a programme is an aggravating factor.

Step 3: Establish a Leniency and Cooperation Protocol

The Commission operates a leniency policy under which the first participant in a cartel to come forward and provide full cooperation may receive total immunity from penalties. Subsequent participants may receive reductions of up to 50%. For financial institutions, the decision to apply for leniency must be made quickly—the Commission’s policy is that only the first applicant in each case receives immunity.

The legislation provides that leniency does not extend to individuals who were the ringleader of the cartel or who coerced others to participate. Directors and officers should be aware that the Commission can bring proceedings against individuals for aiding and abetting a contravention (Cap. 619, s. 101).

Enforcement Trends and the 2025-2026 Outlook

The Competition Commission has publicly stated that financial services is a priority sector for 2025-2026. In its Annual Plan 2025, the Commission committed to “active investigation and, where appropriate, enforcement action in the financial services sector, particularly in relation to information exchange and abuse of dominance in clearing and settlement services.”

The Commission has also signalled an intention to use its new powers under the Competition (Amendment) Ordinance 2024 to require the production of documents and information from third parties, including clients and counterparties. This means that a bank’s own clients may be compelled to provide evidence of anti-competitive conduct.

The Competition Tribunal has shown a willingness to impose substantial penalties. In the 2024 bond syndication case, the Tribunal imposed penalties of HK$120 million on each of two banks, representing approximately 8% of their Hong Kong turnover for the relevant year. The Tribunal also imposed disqualification orders against three directors, barring them from serving as directors of any Hong Kong company for three years.

Actionable Takeaways

1. Conduct a competition law audit of all competitor interactions—syndication meetings, trade associations, and data sharing arrangements—before the end of 2025, using an external legal advisor with competition law expertise.
2. Implement a written competition compliance programme that meets the Commission’s published guidance, including a designated compliance officer and mandatory training for all staff in trading, syndication, and compliance roles.
3. Establish an internal protocol for identifying and reporting potential infringements, with a clear process for evaluating leniency applications within 48 hours of discovering a potential cartel.
4. Review all algorithmic trading systems and data sharing agreements to ensure they do not facilitate the exchange of competitively sensitive information, and document the rationale for any data aggregation or anonymisation.
5. Ensure that directors and senior management receive individual training on their personal liability under the Competition Ordinance, including the risk of disqualification orders and individual penalties.

This does not constitute legal advice. Consult a solicitor for your specific case.