Position Limits - Guide to the New HKEX Limit Definitions
Clients who are signed up for the Position Limits rules package will see 16 rules that cover the various amendments to the statutory position limit regime on the Hong Kong Exchange, which came into effect on 22 December 2023. These amendments require any person who "holds or controls" positions to comply with the position limit and reporting rules at the **individual** fund and sub-fund level, including positions held/controlled individually for the person's own account and multi-managed funds.
Why Are There Separate Rules for the SFC Position Limits?
The SFC Regulation has more complex aggregation requirements, which require positions to be calculated at multiple levels. Since many limits apply on a net basis (rather than a gross basis), it is possible to exceed a limit at a lower level without exceeding the limit at the top level.
There Are Four Requirements for the New Rules:
- To aggregate all holdings to the top entity (which is the approach taken by the standard PL Rules). These are the “SFC All Holdings” rules and work in a standard way.
- To aggregate all proprietary holdings (i.e. holdings for which you are the Legal Owner) to the top entity. This is done by the “SFC Proprietary Holdings” rules, which only include positions if the underlying portfolio has “Proprietary” for CompanyTypePL.
- To calculate for each fund (or sub-fund of an umbrella fund), which is covered by the “Funds and Sub-Funds” rules. These run on every Portfolio in the FundApps system. In order for these rules to run correctly, ExchangeAccountType needs to be defined as either "XHKGClientAccount" or XHKGExchangeParticipantAccount on individual portfolios.
- Finally, to account for subtleties, where a single fund is managed by multiple entities, we have the “Multi-Managed Funds” rules.
What Configuration Is Required for the New Rules to Run Correctly?
There are no new properties required in the position file - the rules only require the existing PL properties. To ensure the correct aggregation, the property CompanyTypePL must be populated correctly on all underlying portfolios with assets relevant to Position Limits.
- Any Portfolios for which you are the Legal Owner must be marked as "Proprietary".
- For the Funds and Sub-Funds rules, ExchangeAccountType needs to be defined as either "XHKGClientAccount" or "XHKGExchangeParticipantAccount" on individual portfolios.
- If the aggregation structure contains a fund which is managed by multiple entities (or more than one such fund), then relevant umbrellas may need to be marked as MultiManaged - please contact FundApps Support for guidance.
If none of these points apply to your Portfolios, then no changes are needed.
If there is any difficulty managing the CompanyTypePL property in the UI, then it can be added/modified via CSV upload of the portfolio file. Please reach out to your CSM or FundApps Support if you have any questions.