How to apply for short selling of Hong Kong shares

1. Why do I need to apply for short selling of Hong Kong stocks separately?

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.

2. How to apply for short selling of Hong Kong stocks?

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」.

2.1 The「Real-Time application」process is divided into four steps:

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.

Notes: 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 to the Stamp Duty Supplemental Terms for the Global Master Securities Lending Agreement. By completing this step, you will activate short selling and enable Futu to collect the pre-paid stamp duty for securities borrowing and lending.

Notes: The stock borrowing and return stamp duty will be refund once the 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).

2.2 The 「Take effect after registration application」 process is divided into three steps:

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).