牌照 · 2025-12-26

SFC Short Position Reporting Regime: Disclosure Obligations and Regulatory Framework for Short Selling

The Securities and Futures Commission (SFC) published its revised Code of Conduct for Persons Licensed by or Registered with the SFC in October 2024, which included updated provisions on short position reporting. This revision is part of a broader effort to enhance market transparency and align Hong Kong’s regulatory framework with international standards, particularly those of the Financial Stability Board. For compliance officers and licensed corporations, the 2025-2026 period marks a critical juncture: the SFC has signalled an intention to conduct thematic inspections on short selling activities, with a focus on reporting accuracy and timeliness. The regulator’s 2024-25 annual report noted a 15% increase in the number of short position reports filed compared to the previous year, reflecting heightened market activity and regulatory attention. For firms operating in Hong Kong, understanding the precise scope of the reporting obligation is no longer optional—it is a prerequisite for maintaining a clean compliance record. Failure to report a reportable short position within the prescribed timeframe can result in disciplinary action, including fines or licence suspension. This article provides a step-by-step breakdown of the disclosure obligations and the regulatory framework governing short position reporting under the SFC’s regime.

The statutory foundation for short position reporting in Hong Kong is the Securities and Futures (Short Position Reporting) Rules (Cap. 571Y). These Rules were enacted under section 397 of the Securities and Futures Ordinance (Cap. 571). The SFC administers the regime, and the Hong Kong Stock Exchange (HKEX) provides the trading infrastructure that triggers the reporting obligation.

Scope of Reportable Securities

The Rules define a “reportable short position” as a short position in any specified stock that exceeds 0.02% of the total number of issued shares of that stock, or HK$30 million in value, whichever is lower. The SFC publishes a list of specified stocks on its website, updated quarterly. As of the first quarter of 2025, the list covers approximately 500 stocks, including all constituent stocks of the Hang Seng Index and Hang Seng China Enterprises Index, as well as certain Exchange Traded Funds (ETFs) and other designated securities. The threshold is calculated on a net basis across all accounts managed by a single licensed corporation. For example, if a firm holds a short position of 1 million shares in a stock with 500 million issued shares, the percentage is 0.2%—exceeding the 0.02% threshold—and the position is reportable.

Who Must Report

The reporting obligation falls on “licensed corporations” as defined under the Securities and Futures Ordinance. This includes corporations licensed for Type 1 (dealing in securities), Type 2 (dealing in futures contracts), and Type 9 (asset management) regulated activities, among others. The obligation applies to positions held in the corporation’s own proprietary account, as well as positions held on behalf of clients where the corporation exercises investment discretion. However, the Rules provide an exemption for positions held in a client’s account where the client is a qualified institutional investor and the corporation has no discretion over the investment decisions. The SFC’s 2023 consultation paper on short selling reforms clarified that this exemption is intended to avoid double reporting, as the institutional client itself may be subject to reporting obligations in its home jurisdiction.

Step-by-Step Reporting Procedure

Compliance with the short position reporting regime requires a structured approach. The following steps outline the procedure that licensed corporations must follow.

Step 1: Calculate the Reportable Short Position

The calculation must be performed at the end of each trading day. The SFC requires firms to aggregate all short positions in the same specified stock across all accounts, including proprietary accounts, managed accounts, and any other accounts over which the firm has control. The aggregation must be done on a “gross” basis—meaning that long positions in the same stock are not netted against the short position for reporting purposes. This is a common source of error. The SFC’s 2024 enforcement report cited a case where a firm incorrectly netted a long position against a short position, resulting in an under-reported short position. The firm was fined HK$1.5 million. The calculation must also account for any derivatives that create a synthetic short position, such as put options or short futures contracts. The SFC’s guidance note on short position reporting, published in 2022, provides a detailed list of instruments that must be included in the calculation.

Step 2: File the Report

The report must be submitted to the SFC through the SFC’s online reporting portal, known as the “Short Position Reporting System” (SPRS). The filing deadline is 6:00 p.m. on the second trading day following the day on which the reportable short position arose. For example, a short position created on a Monday must be reported by 6:00 p.m. on Wednesday. The report must include the following information: the name of the stock, the stock code, the size of the short position in number of shares, and the date on which the position was calculated. The SFC does not require firms to disclose the identity of the underlying client, unless the client is a connected person of the firm. The report is confidential and is not made public by the SFC. However, the SFC may use the aggregated data for market surveillance purposes.

Step 3: Maintain Records

Licensed corporations must maintain records of all short positions, including the calculations used to determine whether a position is reportable, for a period of at least seven years. The SFC may request these records during an on-site inspection. The record-keeping requirement applies even if the position is below the reporting threshold. The SFC’s 2025 thematic inspection findings, published in March 2025, noted that 30% of inspected firms had inadequate record-keeping practices, with some firms unable to produce records of short positions for periods exceeding two years. The SFC reminded firms that record-keeping is a fundamental obligation under the Securities and Futures Ordinance, and failure to maintain proper records can result in disciplinary action.

The SFC has intensified its focus on short selling compliance in recent years. Two significant developments warrant attention.

The 2024 Code of Conduct Amendments

The October 2024 amendments to the SFC’s Code of Conduct introduced a new paragraph 5.6A, which requires licensed corporations to implement internal controls specifically designed to ensure compliance with the short position reporting regime. The Code now requires firms to appoint a designated compliance officer responsible for short position reporting, and to conduct quarterly internal audits of the reporting process. The SFC’s 2024-25 annual report stated that it expects firms to “review and enhance their systems and controls” in light of these amendments. For firms that have not yet updated their compliance manuals, the deadline for full compliance is 1 January 2026.

Enforcement Cases

The SFC has taken enforcement action against several firms for short position reporting failures. In 2024, the SFC reprimanded and fined a global investment bank HK$4 million for failing to report a reportable short position for 15 consecutive trading days. The SFC found that the firm’s automated reporting system had a programming error that excluded certain ETF positions from the calculation. In another case from 2023, the SFC suspended the licence of a boutique asset manager for six months for submitting false short position reports. The manager had deliberately understated the size of its short positions to avoid triggering the reporting threshold. These cases illustrate that the SFC takes reporting failures seriously, regardless of whether the failure was due to a system error or intentional misconduct.

Interaction with Other Regulatory Regimes

The short position reporting regime does not operate in isolation. Firms must also consider the interaction with other regulatory obligations.

The HKEX Short Selling Rules

Short selling on the HKEX is governed by the Rules of the Exchange. The HKEX requires that all short selling orders be designated as such, and that the seller has a “locate” arrangement in place to ensure that the stock can be borrowed for settlement. The short position reporting regime under the SFC is separate from the HKEX’s short selling rules. A firm may comply with the HKEX’s locate requirement but still fail to report a reportable short position to the SFC. The two obligations are independent. The HKEX’s 2024 consultation on short selling concluded with no changes to the locate requirement, but the SFC’s reporting rules remain the primary focus for compliance officers.

The Cross-Border Reporting Dimension

For firms that operate in multiple jurisdictions, the SFC’s reporting regime may overlap with similar regimes in other markets. For example, the U.S. Securities and Exchange Commission (SEC) requires short position reporting on a monthly basis for certain large positions, while the European Securities and Markets Authority (ESMA) requires daily reporting for positions exceeding 0.5% of issued share capital. The SFC’s regime is more granular—the 0.02% threshold is lower than the thresholds in most other major markets. Firms with global operations must ensure that their reporting systems can handle the different thresholds and deadlines across jurisdictions. The SFC has not entered into any mutual recognition agreements with other regulators for short position reporting, so firms must file separate reports in each jurisdiction where they hold reportable short positions.

Actionable Takeaways

  1. Review your firm’s short position calculation methodology immediately to ensure that it aggregates positions on a gross basis and includes all derivative instruments that create synthetic short positions.
  2. Appoint a designated compliance officer for short position reporting by 1 January 2026, as required by the SFC’s amended Code of Conduct.
  3. Conduct a quarterly internal audit of your short position reporting process, and document the findings in a written report that can be produced to the SFC upon request.
  4. Verify that your record-keeping system retains all short position records, including calculations for positions below the reporting threshold, for a minimum of seven years.
  5. If your firm operates in multiple jurisdictions, implement a cross-border reporting system that can handle the different thresholds and deadlines in each market, and do not rely on any assumption of mutual recognition.