Launching a prop firm in Hong Kong is feasible—if you keep your model squarely outside the licensing perimeter (no client business) or, if needed, obtain the right SFC licence. This concise playbook lays out what to do (and what to avoid) so you can ship faster with fewer regulatory surprises.
First call: do you actually need an SFC licence?
Under the Securities and Futures Ordinance (SFO), a corporation must be licensed only if it is carrying on a business in any of the 13 regulated activities (Types 1–13) or actively marketing such services to the Hong Kong public, even if the service is provided from outside Hong Kong. If you only trade the firm’s own capital and do not provide brokerage, advisory, asset-management or an ATS to others, you are commonly outside licensing—but test your facts against the perimeter before launch.
A lean operating model (for unlicensed internal prop)
- Trade only firm capital; no external clients, no discretionary management for others, and no “holding out” as a broker/manager/ATS.
- Keep marketing narrow (describe an internal trading business, not services to the public).
- Write down policies for risk limits, personal-account dealing, conflicts, market conduct and BCP—even if you’re unlicensed.
The build—7 streamlined steps
Step 1 — Incorporation & governance (Week 1)
Set up a Hong Kong private company limited by shares. Appoint directors and a company secretary; keep statutory registers; define decision rights and trading authority.
Step 2 — Banking & treasury (Weeks 2–6)
Open a corporate bank account and prime/broker access as needed. Segregate risk capital, OPEX and tax reserves. Define liquidity buffers and margin workflows.
Step 3 — Tax & audit basics (Day 1 onward)
Hong Kong’s two-tier profits tax applies to corporations at 8.25% on the first HK$2M of assessable profits, then 16.5% above that. Engage an auditor early and set quarterly provisions.
Step 4 — HR, payroll & MPF (Weeks 1–2)
Employers and employees generally contribute 5% each of relevant income to MPF, subject to minimum/maximum income levels. Build onboarding, PA-dealing and conduct clauses into contracts.
Step 5 — Data protection (Build-time + ongoing)
Comply with Hong Kong’s PDPO and the six Data Protection Principles (purpose & collection, accuracy/retention, use, security, openness, access/correction). Publish a privacy notice and define retention schedules.
Step 6 — Trading stack & risk controls (Weeks 2–4)
Choose execution & analytics (e.g., xTrader), broker/venue connectivity, and real-time risk. Implement limits, kill-switches, reconciliations, and month-end closes.
Step 7 — Launch hard-check (2 days)
Re-test your activities against the SFC perimeter (Types 1/4/7/9 common triggers). Keep website language tight to avoid “holding out.” Pause and take advice if anything now looks licensable.
Red flags that push you inside the net
- Public marketing in Hong Kong of dealing/advisory/management services (even if performed offshore).
- Providing a trading system to others (may be Type 7 ATS).
- Virtual-asset platforms (VATPs): SFC-licensed VATP operators must not engage in proprietary trading or market-making, save for narrow off-platform back-to-back exceptions. Don’t conflate an internal prop desk with a VATP model.
FAQ (quick)
Is prop trading legal in Hong Kong without a licence?
Yes—if you trade only firm capital and do not carry on a business in a regulated activity nor actively market such services to the public. Always map your facts to the SFC’s RA list and the s.114/115 tests.
Can we get crypto exposure?
Running or operating within a VATP regime is highly restrictive (no proprietary trading/market-making). Exposure via traditional market instruments (e.g., listed VA ETFs) sits in the traditional broker framework—check your brokers’ rules.
What people-ops hygiene is essential?
Employment/contractor agreements with IP & conduct, PA-dealing rules, conflicts controls, MPF enrolment, and a BCP/incident framework.
Not legal advice. Have Hong Kong counsel review your exact model and website before going live.
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