Hong Kong’s Uncertificated Securities Market: What USM Changes for Pledged HKEX Shares & Paper Certificates

Part of the Hong Kong Stock Loan Regulatory & Eligibility Guide — view the full guide

Hong Kong’s uncertificated securities market (USM) is scheduled to commence on 16 November 2026. It will let legal title to HKEX-listed shares be held and transferred without paper. Under the rules as made, investors will not be obliged to give up existing share certificates, which stay valid — but once an issuer’s shares become participating securities, no new certificate will be issued for them.

That last point matters most to a holder who has pledged shares by delivering the certificates, with signed transfer documents, to a lender, a custodian or an escrow agent. Most of the practical questions arise at each issuer’s participation date rather than on launch day; the new transfer-fee basis is the exception. What follows sets out what the Securities and Futures Commission (SFC), the Government and the legislation have confirmed, and the questions left for the holder’s own Hong Kong counsel and lender.

When does Hong Kong’s uncertificated securities market start?

On 16 November 2026, as scheduled: the SFC’s frequently asked questions about USM state that "USM will be implemented on 16 November 2026". The regime, in the Government’s words, "seeks to eliminate the need for paper documents in evidencing and transferring legal ownership of prescribed securities", which include shares listed on The Stock Exchange of Hong Kong Limited (the Exchange) wherever the company is incorporated.

• 30 March 2026 — the SFC announces that the regime "is targeted to be launched on 16 November 2026".
• 30 April 2026 — the Government gazettes the Commencement Notice (L.N. 44 of 2026), appointing 16 November 2026 for Part 2 (except section 9(2)) and Part 5 of the Securities and Futures and Companies Legislation (Amendment) Ordinance 2021. The Securities and Futures (Uncertificated Securities Market) Rules (Cap. 571AS; the USM Rules), made in 2025, take effect on the same date.
• 16 November 2026 (scheduled) — implementation date.

No postponement had been announced by the date of this article, and the USM Rules remain shown on Hong Kong e-Legislation as not yet in operation.

Which HKEX-listed companies join USM first, and how long do existing issuers have?

New listings go first. Under rule 28 of the USM Rules, securities first listed after the launch date will have to be uncertificated from listing, unless the Exchange is satisfied in the first year that, among other things, there are "exceptional circumstances", or the SFC grants an exemption under rule 32. Issuers already listed must join by the earlier of a date specified for each of them and five years from implementation, a period the SFC’s timeline labels "Launch to 2031".

The SFC’s FAQ says USM "will initially apply only to prescribed securities that are constituted under the laws of Hong Kong, Bermuda, the Cayman Islands or the Chinese Mainland"; for securities constituted elsewhere, participation "is voluntary and not mandatory".

No order of migration has been published; each date is to be set by the issuer’s registrar, Hong Kong Securities Clearing Company Limited (HKSCC) and the Exchange. The Exchange’s Guide on the Uncertificated Securities Market (effective 16 November 2026) says a listed issuer will have to announce a USM Transition Plan that includes the participation date and publish a reminder "no later than 21 business days" beforehand. Under paragraph 6.8, the last day for registering a transfer that entitles the transferee to a physical certificate "should be the tenth business day prior to the issuer’s USM Participation Date".

Does a holder have to give up paper share certificates under USM?

No. The SFC’s FAQ says investors may continue holding existing securities in certificated form after they become participating securities: "there is no obligation to dematerialize their existing holdings". An HKSCC circular of 1 September 2026 (PT/DPS/CCASS/007/2026) adds that dematerialisation of existing physical certificates "is optional and does not have a time limit".

The SFC’s USM page labels the paper route "Retained for now" and adds a third way to hold: in one’s own name without certificates, through a USI Facility set up with the issuer’s approved securities registrar, with transfers completing as quickly as within the same day against around 10 business days for paper.

Voluntary conversion is at the registered holder’s initiative and runs one way. Under rule 22(2) of the USM Rules the issuer "may, at the request of the registered holder, dematerialize" certificated units if, among other conditions, it has received "a valid title instrument issued to the registered holder covering the subject units" (unless none was issued or it is satisfied that the instrument is lost or damaged). HKEX’s USM FAQ of 3 June 2026 says there would be no option to rematerialise "in any circumstances, except delisting".

Do existing share certificates stay valid after an issuer joins USM?

Yes. The SFC states that "existing certificates will not be invalidated". What will end on the participation date is the issue of new paper.

• No new certificates. Under rules 29(1) and 30(1) of the USM Rules, the issuer of participating securities "must not issue any units of those securities as units in certificated form" and "must not issue any title instrument to cover any units of those securities", subject to the exemptions in rule 32.
• Additional units will be uncertificated. Investors who acquire more units of the same participating securities "will have to hold the additional units in uncertificated form". Rights, subscription warrants and bonus shares will arrive the same way.
• Part of a certificate. A holder who transfers some units "may need to dematerialize the units they have not transferred", for example where one certificate covers both.
• Lost or damaged certificates. No replacement will be issued; the securities must be dematerialised instead.
• The next transfer. In disclosures it sets out for new applicants whose securities join USM after listing, the Exchange’s guide says that after participation "no new title instrument will be issued, and as such, the securities must be dematerialized upon the next transfer or upon any application to cancel lost or damaged title instrument".

What happens to shares held in CCASS through a broker or custodian when an issuer joins USM?

The holding structure does not change. The SFC labels this route "Unchanged", and its announcement of 30 March 2026 says "the existing nominee structure in the Central Clearing and Settlement System (CCASS) will be retained"; deposit and withdrawal processes, and the fees CCASS participants pay, will change.

Shares held this way are registered in the name of HKSCC Nominees Limited; the investor holds a beneficial interest. Paper remains at the level of the register — "Paper certificates are issued to HKSCC Nominees and kept in its vault" — and rule 31(2) of the USM Rules will require those units to be dematerialised "within 6 months after the date on which those securities become participating securities".

Investors keep the option to withdraw shares from CCASS, but once the securities are participating securities "they may only hold them in their own names in uncertificated form after withdrawal". A facility that assumes shares can be withdrawn and delivered as certificates is assuming something that will cease to be possible. Stock Connect holdings sit in a different chain: see Stock Connect shares as collateral.

What can an approved securities registrar charge to dematerialise or transfer shares?

The SFC has set limits on three fees, restated in its FAQ (questions 3.5A and 3.5B). For individuals, a USI set-up fee may not exceed HK$50 per facility, and a dematerialisation fee HK$5 per certificate or title instrument, with a minimum of HK$20 per request per stock. For transfers, the transfer and registration fee may not exceed 0.02% of the value transferred, with a minimum of HK$20 per request. That ad valorem basis does not wait for an issuer’s participation date: the FAQ says it "will apply in respect of all prescribed securities, ie, both participating securities and non-participating securities", so it applies from implementation.

Three qualifications are easy to miss. First, the first two limits apply to individuals only: for companies, fees "will still need to be fair and reasonable in the circumstances". Second, the limits attach to the registrar’s baseline service, which for set-up and dematerialisation means completion within five business days. Third, a withdrawal from CCASS will attract no registrar transfer fee, but from implementation HKSCC will charge the CCASS participant 0.015% of the value withdrawn, minimum HK$10 (HK$3.50 per board lot at the date of this article).

Stamp duty is outside this article: see stamp duty on Hong Kong share pledges.

What does USM change for pledged shares when the share certificates have been delivered as security?

It leaves the delivered certificate valid and changes what can happen next. The security package commonly used for certificated Hong Kong shares is built around the paper: the anatomy of a share pledge agreement describes delivery of the share certificates with signed but undated instruments of transfer and bought-and-sold notes; share charge versus share pledge explains why possession is a concept that fits physical certificates.

In its July 2024 consultation conclusions, the SFC kept dematerialisation optional, a "main reason for this" being that "we consider the return of title instruments (as opposed to their outright invalidation) to be essential to ensuring that we do not inadvertently affect third-party rights (eg, where securities are pledged as collateral by delivery of the title instrument)" (paragraph 78).

A top-up with newly acquired shares, a bonus or rights entitlement, a transfer of part of a holding, the replacement of a damaged certificate: each would today ordinarily end with a certificate being issued, and after the participation date none will. Where shares have long been held through a trust or holding company, the first question is which entity is the registered holder (see the family-office inheritance lens).

Does USM change how a share charge over HKEX shares is taken or enforced?

The USM Rules as made contain no provision on charges over uncertificated shares. What they will change is the paper a certificate-based security package relies on: no new certificates once a security participates (rules 29 and 30), and an instrument of transfer that an issuer may refuse for uncertificated units (rule 12(1)). A reading for this article of the SFC’s USM page and FAQ, the Exchange’s guide and HKEX’s USM FAQ found no passage on charged, mortgaged or pledged shares.

The Ordinance names charges; the rules do not. Section 101AAM(2)(i) of the Securities and Futures Ordinance, as added in 2021 and due to commence on 16 November 2026, lets the SFC make rules on "matters relating to charges over prescribed securities, including the evidencing of such charges". The USM Rules gazetted in February 2025 contain no rule under that head, and nothing read for this article says whether the power will be used.

The locking idea dates from 2019. The January 2019 joint consultation paper of the SFC, HKEX and the Federation of Share Registrars said that "alternative arrangements will have to be put in place to facilitate pledging in the USM environment", and proposed a "locking arrangement": pledged uncertificated shares locked by the registrar and administered "in accordance with terms agreed among the pledgor, pledgee and ASR" (the registrar; paragraph 99(f)). That was a proposed operating model, not a rule.

The SFC left pledging to commercial agreement. Asked how the practice of "pre-signing instruments of transfer" might be replaced under USM, the SFC said in its July 2024 conclusions (paragraphs 141 and 142) that it understood services for "locking" securities to facilitate pledging are "offered by some securities registrars today", but that it did "not consider it appropriate for the legislation to mandate that pledging services be provided", preferring "to leave this as a matter for commercial agreement". It added that, on its understanding, no changes can be made to a register while it is closed, "including therefore any change stemming from the enforcement of a pledge".

The registrars describe a possible service. The Federation of Share Registrars’ Information Paper for Issuers and Shareholders of 20 April 2026 says that in an uncertificated holding "this physical possession is not possible", and that registrars "may also consider offering a service that provides an equivalent form of control for uncertificated securities". That is an industry paper: not law, not SFC guidance on how security is taken, and not a description of a service on offer.

Two rules bear on transfer documents. For units still in certificated form, rule 23 lets the issuer, "at the request of the transferee", dematerialise the units being transferred if the transferee is a system-member, the issuer has received "valid title instruments issued to transferor that are sufficient to cover the subject units", and it is "satisfied that the transfer may be registered". For units already uncertificated, rule 12(1) lets an issuer "refuse to register a transfer" on the basis of an instrument of transfer. What either rule means for signed transfer documents held under an existing security is not addressed in the SFC or Exchange documents above.

None of the documents read for this article says how a charge or mortgage over an own-name uncertificated holding is created, perfected, ranked or enforced. How enforcement runs today is described in enforcement and forced sale on default; how it will run for a holding with no certificate is a question for Hong Kong counsel.

What should a holder of pledged shares ask counsel and the lender before the issuer joins USM?

The published facts point to six questions for a holder whose certificates have been delivered as security, listed without answers, which depend on the facility documents, the issuer’s registrar and Hong Kong law.

• What replaces delivery of a certificate once the shares are participating securities? No new certificate will be issued; "locking" is left to commercial agreement.
• What happens on a top-up or a partial release after the participation date? Units acquired after that date arrive uncertificated, and transferring part of a certificate may mean dematerialising the rest.
• Who may request dematerialisation while a certificate is held as security? Rule 22 looks to the registered holder’s request and the valid title instrument, rule 23 to a transferee’s request; what the facility documents say about releasing a certificate is a separate question.
• Can signed transfer documents held in escrow still be used? See rules 23 and 12(1) above.
• Do the facility documents define the security by reference to certificates? A drafting question for counsel on both sides.
• How will the issuer’s participation date be tracked, and by whom? The dates will come from the issuer’s announcements and the lists HKEX is to publish.

The same questions apply to a holder considering a new stock loan against certificated shares before an issuer’s participation date. The table below compares the three holding routes; the regulatory and eligibility guide maps the wider perimeter.

As made, the USM rules do not take the certificate away. They stop the next one from being issued — and a security package that has only ever been described in terms of paper will, issuer by issuer, have to say what happens then.

This article is educational and does not constitute legal, regulatory, tax, or investment advice, nor an offer or solicitation. It describes the regime in general terms as at 18 September 2026, before it is in operation; dates, rules and guidance may change, and the primary sources prevail. How security over certificated or uncertificated shares is created, perfected, or enforced, and how any of the above applies to a particular facility, is a question for your own Hong Kong legal counsel. Nothing here is a recommendation to dematerialise, or not to dematerialise, any holding. Hong Kong Stock Loans acts as an arranger and introducer in collaboration with SFC-licensed counterparties; it is not a lender or a law firm.

Anthony Lam Tsz-Kin, Co-Founder & Principal

Educational; not advice. Editorial standards · Disclosures