On 8 September 2025, the Hong Kong Securities and Futures Commission (SFC) announced disciplinary action against Instinet Pacific Limited (Instinet) for persistent failures to report cross trades to The Stock Exchange of Hong Kong Limited (SEHK). The regulator imposed a public reprimand and a fine of HK$8 million under section 194 of the Hong Kong Securities and Futures Ordinance (HK SFO). The HK SFC investigation revealed that between December 2012 and March 2018, Instinet failed to report 8,817 pairs of cross trades worth approximately HK$25.9 billion. The trades were executed between clients and an affiliated company but not disclosed to the SEHK as required. The HK SFC found that Instinet had no internal policies or procedures to ensure compliance with reporting obligations and conducted no review of its reporting process during the period.
In para 1 of the Statement of Disciplinary Action (8 September 2025), the HK SFC stated: “Instinet Pacific Limited (Instinet) [was fined] HK$8 million pursuant to section 194 of the Securities and Futures Ordinance for failing to comply with, and implement and maintain measures appropriate to ensuring compliance with Rule 526 of the Rules of the Exchange in relation to the reporting of direct business transactions (i.e. cross trades) to The Stock Exchange of Hong Kong Limited (SEHK) between December 2012 and March 2018.”
In para 3 of the Statement, the Code of Conduct requires licensed corporations to: “act with due skill, care and diligence” (GP 2), “comply with all regulatory requirements” (GP 7), and “implement and maintain measures appropriate to ensuring compliance with laws, rules, regulations and codes” (paragraph 12.1).
In para 4 of the Statement, Exchange Participants are required to “input details of cross trades… in the Orion Trading Platform or report such transactions to the SEHK within the prescribed time limits in accordance with Rule 526 of the Rules of the Exchange.”
Breaches Identified by the SFC
The HK SFC found that Instinet:
- Failed to report 8,817 pairs of cross trades worth around HK$25.9 billion between its clients and an affiliated company
- Had no policies or procedures to require, govern, or monitor reporting of cross trades to the SEHK.
- Did not review its trade reporting process during the relevant period.
- Breached GP 2, GP 7, and paragraph 12.1 of the Code of Conduct.
The HK SFC described the reporting failure as “particularly serious as it lasted for almost five and a half years and affected a large number of transactions.”
Required Compliance for Licensed Corporations
This disciplinary action reinforces the regulatory expectation that licensed corporations must establish internal controls to ensure compliance with Rule 526 of the SEHK Rules and the Code of Conduct. Firms engaged in cross trades must implement policies for reporting, conduct regular reviews of reporting processes, and maintain robust monitoring systems. Failure to do so exposes firms to sanctions under section 194 of the Securities and Futures Ordinance, including financial penalties and reputational damage.
Geopolitical and Market Insights
Hong Kong continues to assert its role as a leading financial centre by upholding strict market integrity standards. The enforcement action sends a clear message to regional and international participants that Hong Kong regulators will not tolerate prolonged non-compliance in trade reporting. This stance reinforces Hong Kong’s alignment with global best practices in transparency and accountability, particularly critical as cross-border trading volumes in Asia increase.
(Source: https://apps.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=25PR140)
