According to the "Securities and Futures Ordinance」, unless the investor owns the stock or reasonably believes that he can successfully borrow the stock when he sells the shares, he cannot sell the shares of no position. Therefore, you need to borrow stocks firstly, and then short them. Both the borrower and the lender of the stock need to sign the "Securities Lending Agreement". You will sign the agreement with Futu (the securities lender) as the securities borrower.
You need to register the above agreement with the Hong Kong Inland Revenue Department and pay the registration fee of HK$270. In order to reduce the complicated operations, Futu will act as an agent to register the "Securities Lending Agreement" on the GovHK website on your behalf. You can check the registration progress at any time on the app.
Applying for short selling of Hong Kong stocks is not limited to the signing of the above agreement and the deduction of the registration fee.
First, you need to successfully open a margin trading account or margin universal account for Hong Kong stocks. When the above account is available, you can find the application portal in the Futu app. Click the "Accounts" > "HK Margin Account" or "Margin Universal Account - Securities"> "More" > "Short Selling".
Futu offer 2 kind of short selling applications, which are 「Real-Time application」 and 「Take effect after registration application」.
1) Sign the agreement
You need to sign the "Securities Lending Agreement" with Futu, which can only take effect after passing all internal and external approval procedures. In this step, you need to read and sign the agreement.
2) Deduction of registration fee
In order to reduce the complicated operations for you, Futu will register the "Securities Lending Agreement" on your behalf as an agent and pay the registration fee. In this step, you need to authorize Futu to initiate the task of checking the maximum withdrawable amount and deduct funds from the securities account.
Note: When performing automatic deduction, the system will check the current "maximum withdrawable" amount of the account, not the "cash withdrawable" amount. Therefore, if you agree to the deduction, it means that you know that your account may generate loan interest after the deduction, and you are willing to pay related fees and loan interest.
3) Activate short Selling
You will need to read and agree with「Stamp Duty Supplemental Terms for Global Master Securities Lending Agreement」, In this step you will activate short selling and allowed Futu to deduct stamp duty for securities borrowing.
You can conduct short selling of Hong Kong stocks once the permission of short selling function is activated. However, you still need IRD's approval to open short selling position resulted from option exercise of Hong Kong stock options.
Notes: The securities borrowing and relevant stamp duty will be refund once the Registration application has been approved.
4) Registration with the tax bureau and take effect
Futu will register the "Securities Lending Agreement" on the GovHK website as an agent on your behalf and will review the result of the tax bureau registration. In this step, you do not need to do anything, just wait for the review result. After all the steps are completed, you will receive a system message notification of "Hong Kong stock short sale registration takes effect".
Please note: If the Stamp Office rejects the registration of this agreement, the lender (Futu) will not refund the registration fee to the borrower (customer).
1) Sign the agreement
You need to sign the "Securities Lending Agreement" with Futu, which can only take effect after passing all internal and external approval procedures. In this step, you need to read and sign the agreement.
2) Deduction of registration fee
In order to reduce the complicated operations for you, Futu will register the "Securities Lending Agreement" on your behalf as an agent and pay the registration fee. In this step, you need to authorize Futu to initiate the task of checking the maximum withdrawable amount and deduct funds from the securities account.
Note: When performing automatic deduction, the system will check the current "maximum withdrawable" amount of the account, not the "cash withdrawable" amount. Therefore, if you agree to the deduction, it means that you know that your account may generate loan interest after the deduction, and you are willing to pay related fees and loan interest.
3) Registration with the tax bureau and take effect
Futu will register the "Securities Lending Agreement" on the GovHK website as an agent on your behalf and review the result of tax bureau registration. In this step, you do not need to do anything, just wait for the review result. After all the steps are completed, you will receive a system message notification of "Hong Kong stock short sale registration takes effect", and then you can start short selling.
While Waiting for the result of tax bureau registration, you could also activate short selling, you can refer to 「Real-Time application」 process step (3) for further information.
Please note: If the Stamp Office rejects the registration of this agreement, the customer will still not be able to use short-selling transactions, and the lender (Futu) will not refund the registration fee to the borrower (customer).