Comprehensive analysis of SFC Type 11 licenses – from business triggering conditions to capital tiers for the three types of dealers, from mandatory transaction reporting to margin requirements, from application process to transitional arrangements. AIYING provides professional Type 11 license application and compliance consulting services.
Minimum Quick Funds (Central Dealer)
SFC Approval Period
Capital stratification system
根據《證券及期貨條例》（第571章）附表5第11部，第11類受規管活動是指”就場外衍生性商品產品進行交易”或”就場外衍生性商品產品提供意見”。此牌照類型於2019年修訂SFO時引入，旨在將OTC衍生工具市場納入監管框架，符合G20金融改革承諾。
In short, any entity that conducts OTC derivatives trading in Hong Kong as a business (including acting as a counterparty, market maker, or intermediary), or provides investment advice to clients on OTC derivatives, must hold a Type 11 license. This is a new regulatory framework introduced by the SFC in response to reforms in the global OTC derivatives market following the 2008 financial crisis.
| Item | content |
|---|---|
| Regulated activity number | Category 11 (RA11) |
| Legal basis | Part 11 of Schedule 5 to the Securities and Futures Ordinance |
| Suitable | OTC derivatives dealers, trading platforms, and financial institutions |
| regulatory agency | The Securities and Futures Commission (SFC) of Hong Kong |
| Introduction time | 2019 SFO Revision |
| Effective Time | The new system for OTC derivatives will take effect simultaneously. |
| 俗稱 | "OTC Derivative Instruments License" |
Acting as a principal in OTC derivatives transactions with clients
Provide market making services for OTC derivatives.
Inter-dealer broking of OTC derivatives transactions between institutional clients.
Provide investment advice to clients regarding OTC derivatives.
Managing portfolios containing OTC derivatives, where trading/advisory activities are not entirely subordinate to portfolio management.
Arrange the execution of OTC derivatives transactions for clients
Only manages portfolios containing OTC derivatives (holds a Type 9 extended license, and trading activities are entirely subordinate to portfolio management).
Provides automated trading services (ATS) only for OTC derivatives trading (belonging to the expanded Type 7 scope).
Banking institutions (authorized institutions regulated by the HKMA, not the SFC)
Only intra-group OTC derivatives trading
Only proprietary trading is conducted, without involving clients.
This provides general market information or educational content on OTC derivatives only and does not constitute investment advice.
License No. 11 classifies dealers into three categories based on the nature of their business: central dealers of asset management groups, OTCD brokers, and general dealers, each with distinctly different capital requirements, ranging from a minimum of HK$1,500 million to HK$1.56 million.
Licensed institutions must report OTC derivative transactions to the HKTR on a T+2 basis, covering five asset classes: interest rates, foreign exchange, equities, credit, and commodities. This will be mandatory from September 29, 2025.
License No. 11 has complex overlaps with existing Type 7 (ATS) and Type 9 (Asset Management) licenses. Existing license holders may need to upgrade or obtain new licenses, making transitional arrangements crucial.
January 2025, 9
Mandatory reporting of OTC derivatives transactions becomes effective
January 2025, 4
SFC resumes charging annual license fees (HK$4,740/year/per Class RA for corporations, HK$4,740/year/per Class RA for ROs)
January 2024
SFC更新《勝任能力指引》，RA11與RA2/RA5歸為同一考試組別，要求Paper 1+3+7+9
Major investment banks have established OTC derivatives trading desks in Hong Kong to provide institutional clients with pricing and execution services for products such as interest rate swaps and credit default swaps.
Type 11 (General OTCD dealer)
Extremely high capital requirements (tangible capital starting from HK$10 billion), a robust risk management framework must be established, and mandatory transaction reporting is mandatory.
Hedge funds extensively use OTC derivatives (such as total return swaps and variance swaps) as core tools of their investment strategies, and their trading activities go beyond the scope of pure portfolio management.
Type 11 + Type 9 (Central Dealer for Asset Management Groups)
Determine whether the transaction activity is "entirely subordinate" to portfolio management and capital requirements (paid-up share capital of HK$3,000 million).
Inter-dealer brokers who facilitate OTC derivative transactions between institutional clients do not hold principal positions; they only provide matching and execution services.
Type 11 (OTCD Broker)
Paid-in capital of HK$6,000 million, quick funds of HK$3,000 million, and restrictions on not holding any principal positions.
Fintech companies develop electronic trading platforms for OTC derivatives, providing clients with automated trade execution and price discovery services, involving market making or counterparty trading.
Type 7 (ATS Extension) + Type 11
Determine whether only ATS services are provided (Type 7) or market making/counterparty transactions are involved (Type 11 required), and IT system compliance requirements.
The Type 11 license is not a "one-size-fits-all" license. The SFC categorizes OTC derivatives dealers into three types based on the nature of their business and the level of risk, each with distinctly different capital requirements. Choosing the right dealer type is the first step in applying for a Type 11 license and a key factor in determining capital investment.
Central OTCD Dealer in AM Group
Asset management groups are the preferred choiceCentral Transaction Entities in Asset Management Groups
Centralized execution of OTC derivatives transactions for funds/accounts within the group.
Minimum paid-in capital
HK$30,000,000
Minimum quick capital
HK$15,000,000
It must be an affiliated company of an asset management group, and the group must have a regulated asset management entity.
OTCD Broker (Inter-dealer)
Exclusive to brokersBrokers who facilitate transactions between institutional clients
We do not hold any principal positions; we only facilitate inter-institutional transactions.
Minimum paid-in capital
HK$60,000,000
Minimum quick capital
HK$30,000,000
Acts solely as an intermediary between institutional clients and does not hold principal positions.
General OTCD Dealer
Highest capital requirementAll other OTC derivatives dealers
As a counterparty in transactions, market making, etc.
Minimum paid-in capital
HK$500,000,000 (Discount) / HK$1,000,000,000 (Standard)
Minimum quick capital
HK$78,000,000 (Discount) / HK$156,000,000 (Standard)
Traders who do not meet the first two criteria
FRR Reform Tips:The SFC is pushing for a comprehensive overhaul of the Financial Resources Rule (FRR), which will introduce a more refined capital requirements framework. The capital requirements for the three types of dealers may be adjusted depending on the final FRR reform plan; close attention is advised to monitor the SFC's latest announcements.
X misunderstandingLicense plate number 11 often requires hundreds of millions of dollars in capital, and only large investment banks can apply for it.
✓ clarifyCapital requirements depend on the type of dealer. The minimum paid-up capital for a central dealer in an asset management group is HK$30,000,000, and quick capital is HK$15,000,000, which is not unaffordable for large asset management groups. The key is to correctly determine which type of dealer you belong to.
X misunderstandingI already hold a Type 9 license and trade OTC derivatives, so I don't need to apply for a Type 11 license.
✓ clarifyThe expanded Type 9 license does indeed cover managing portfolios containing OTC derivatives. However, if your OTC derivatives trading or advisory activities are not 'entirely subordinate' to portfolio management—for example, providing OTC derivatives trading execution or independent advice to non-fund clients—a separate Type 11 license is required.
X misunderstandingAs a broker, not holding principal positions carries lower risk, and therefore the capital requirements should be lower.
✓ clarifyIn reality, the paid-up capital requirement for OTCD brokers (HK$60,000,000) is higher than that for central dealers of asset management groups (HK$30,000,000), but lower than that for general dealers (starting from HK$500,000,000). The SFC has a specific capital framework for brokers, and it cannot be simply assumed that 'not holding positions = low capital'.
| Item | content |
|---|---|
| Regulated activity number | Category 11 (RA11) |
| Legal basis | Part 11 of Schedule 5 to the Securities and Futures Ordinance |
| Suitable | OTC derivatives dealers, trading platforms, and financial institutions |
| regulatory agency | The Securities and Futures Commission (SFC) of Hong Kong |
| Introduction time | 2019 SFO Revision |
| Effective Time | The new system for OTC derivatives will take effect simultaneously. |
| 俗稱 | "OTC Derivative Instruments License" |
note:The capital requirements for license number 11 are significantly higher than most other SFC licenses. The standard requirement for general OTCD dealers (tangible capital of HK$1,000,000,000) is the highest among all SFC license types.
IT systems are one of the key areas that the SFC focuses on when reviewing License No. 11 applications. The transaction reporting system must be able to cover the five major asset classes (interest rates, foreign exchange, equities, credit, and commodities) and complete reporting within the specified timeframes.
| Character | Required exam | Explain |
|---|---|---|
| RO (Responsible Personnel) | Paper 1 + Paper 3 + Paper 7 + Paper 9 | Paper 1 (Basic Regulation) + Paper 3 (Derivatives Regulation) + Paper 7 (Financial Markets) + Paper 9 (Derivatives) |
| LR (Licensed Representative) | Paper 1 + Paper 3 + Paper 7 + Paper 9 | Paper 1 (Basic Regulation) + Paper 3 (Derivatives Regulation) + Paper 7 (Financial Markets) + Paper 9 (Derivatives) |
important hint:根據SFC 2024年10月更新的《勝任能力指引》，RA11與RA2、RA5歸為同一考試組別。 RO和LR均須透過Paper 1+3+7+9共四卷，該要求自RA11/RA12新牌照制度生效後適用。
When assessing a “suitable candidate”, the SFC will consider:
Preparation + Review
Complex situations: 9-12 months
Corporate application fee starts
1-3 months
2-4 weeks
4-6 months
2-4 weeks
| Item | Amount of money |
|---|---|
| Corporate license application fee | HK$4,740 per RA category |
| RO Individual Application Fee (per person) | HK$2,950 |
| LR individual application fee (per person) | HK$1,790 |
| Corporate Annual License Fee | HK$4,740/year/per type of RA |
| RO Annual License Fee (per person) | HK$4,740/year/per type of RA |
| LR annual license fee (per person) | HK$2,950/year/per type of RA |
| Consequences of late payment | |
| Overdue within 1 month | SFC issued a payment reminder. |
| Overdue for 1–3 months | Additional late fees will be charged. |
| Overdue for more than 3 months | SFC may suspend or revoke the license. |
| Corporate application fee | HK$4,740 |
|---|---|
| RO application fee (HK$2,950 for 2 people) | HK$5,900 |
| LR application fee (HK$1,790 for 2 people) | HK$3,580 |
| Total cost of first-time SFC application | HK$14,220 |
| Annual continuing expenses | |
| Corporate Annual License Fee | HK$4,740 / year |
| RO Annual License Fee (2 people × HK$4,740) | HK$9,480 / year |
| LR annual license fee (2 people × HK$2,950) | HK$5,900 / year |
| Total annual SFC fees | HK$20,120 / year |
The above are only the official fees charged by SFC. Actual application costs also include company registration fees, capital injection, RO compensation, compliance system construction, and IT system deployment. It is recommended to contact AIYING for a detailed cost estimate.
The SFC has stricter requirements for the business plan of license No. 11 than for other licenses, requiring detailed explanations of the scope of OTC derivative products, trading strategies, risk management methodologies, etc.
The SFC will review the functionality and compliance of the transaction reporting system. The system must be able to cover the five major asset classes and complete reporting on a T+2 basis.
Existing Type 7 or Type 9 license holders may need to upgrade or obtain new licenses during the transition period. Ignoring the transition arrangements could lead to compliance risks.
11號牌要求RO和LR通過HKSI LE Paper 1+3+7+9共四卷，與RA2、RA5同組。許多申請人未及時了解最新考試要求，導致申請延誤。
Misjudging dealer type leads to insufficient capital reserves. For example, mistakenly believing oneself to be a central dealer of an asset management group (HK$3,000 million) when in fact one should be classified as a general dealer (HK$5 million and up).
自2025年9月29日起，所有持牌法團須在T+2基礎上向HKTR（香港交易資料儲存庫）報告其OTC衍生工具交易。這是11號牌持牌人最重要的持續合規義務之一。
| Asset Class | Typical products |
|---|---|
| Interest rate derivatives | Interest rate swaps (IRS), interest rate options, and interest rate forward agreements (FRA) |
| Foreign exchange derivatives | Foreign exchange forwards, foreign exchange swaps, foreign exchange options, and non-deliverable forwards (NDFs). |
| Equity Derivatives | Equity swaps, equity options, contracts for difference (CFDs), total return swaps (TRS) |
| Credit derivatives | Credit Default Swaps (CDS), Total Return Swaps (Credit-related) |
| Commodity Derivatives | Commodity swaps, commodity options, commodity forwards |
T+2 business days (i.e., the report will be completed within 2 business days after the transaction is executed)
When submitting electronically through the HKTR system, the data format and fields specified by SFC must be used.
For OTC derivative transactions that are not settled through a central counterparty (CCP), licensed corporations must exchange initial margin (IM) and variable margin (VM) with the counterparty to reduce counterparty credit risk.
Collected at the start of the transaction, covering potential losses in the event of counterparty default. A calculation model approved by the SFC (standard method or internal model method) must be used.
Priced daily at market value, covering changes in market value during the transaction's duration. Exchanges must be completed on a T+1 basis.
Cash, government bonds, and highly rated corporate bonds are acceptable collateral. A collateral management framework must be established, including haircut rules.
A dispute resolution mechanism for security deposits must be established, including dispute notification, escalation procedures, and resolution time limits.
After obtaining License No. 11, the licensed corporation must continuously comply with the following obligations. The SFC will monitor the compliance of the licensed corporation through regular inspections, on-site audits, and off-site monitoring.
1. Maintain minimum capital requirements (by dealer type)
3. Submit audited annual financial statements each year.
5. Comply with the SFC Code of Conduct and all applicable regulatory guidelines.
7. Maintain a sound record-keeping system.
2. Submit monthly financial statements (FRR statements) to the SFC.
4. Promptly notify SFC of any significant changes (such as changes in RO, changes in business scope, changes in shareholders, etc.).
6. Cooperate with SFC's regular inspections and on-site audits.
8. Continuing training and CPT (Continuing Professional Training) requirements
The SFC continues to strengthen its oversight and enforcement of the OTC derivatives market. Violations of the compliance requirements related to License No. 11 can lead to serious legal and commercial consequences.
| Violations | possible consequences | Severity |
|---|---|---|
| Failure to report transactions on time | Fines up to HK$10,000,000 + daily fines | high |
| Failure to comply with margin requirements | Fines + possible suspension or revocation of license | high |
| Failure to maintain minimum capital requirements | Immediately notify SFC + potential restrictions on business activities | high |
| Incomplete record saving | Fines + Disciplinary Action | 中 |
| Failure to promptly notify SFC of significant changes | Fines + Disciplinary Action | 中 |
License plate number 11 has complex overlapping relationships with the existing SFC licensing system. A proper understanding of these relationships is key to avoiding duplicate or missed applications.
Type 7 has been expanded to include providing ATS services for OTC derivatives. If the platform also involves market making or counterparty trading, a Type 11 application is required.
Type 9 has been expanded to cover the management of portfolios containing OTC derivatives. If OTC derivatives trading/advisory activities are not entirely subordinate to portfolio management, then Type 11 is required.
Type 1 does not cover OTC derivatives trading. Brokers holding Type 1 licenses who wish to offer OTC derivatives services to their clients must apply for Type 11 licenses.
Type 3 covers leveraged forex trading. Some forex derivatives may trigger both Type 3 and Type 11 requirements, depending on the specific product structure.
Important reminder: The transition period is 6 months. Existing licensees engaged in OTC derivatives business must submit a Type 11 license application to the SFC (if required) within 3 months before the transition period begins.
From the effective date of the new OTC derivatives regulations, existing licensees will enter a 6-month transition period.
Existing licensees must assess whether their OTC derivatives business triggers Type 11 requirements.
Organizations requiring Type 11 licenses must submit their applications or upgrade their existing licenses within three months prior to the transition period.
All entities engaged in OTC derivatives business must hold the relevant licenses, otherwise they will face regulatory action.
Asset management + OTC derivatives trading + investment advice. Suitable for large asset management groups, with the central trading entity holding Type 11 and the asset management entity holding Type 9.
Type 11 (Central Dealer): HK$3,000 million+ Type 9: HK$500 million
Brokerage services for pure OTC derivatives. We only facilitate transactions between institutional clients and do not hold any principal positions.
Type 11 (OTCD Broker): HK$6,000 million
Do you trade OTC derivatives or provide related advice in Hong Kong?
Are you a banking institution (an accredited institution regulated by the HKMA)?
Is your OTC derivatives activity limited to proprietary trading?
Do you hold a Type 9 license and have your OTC derivatives activities entirely subordinate to portfolio management?
✓ Dealer type assessment and capital planning
✓ License plate combination strategy recommendations (optimal combination of Type 7/9/11)
✓ Application timeline during the transition period
✓ RO Candidate Qualification Assessment and Recommendation
✓ Compliance system design and setup (including transaction reporting and margin system)
✓ SFC application material preparation and submission
✓ SFC communication and coordination during the approval process
The No. 11 license system is expected to take effect on September 29, 2025. The following is a profile of anticipated applicants based on industry analysis; the official list of license holders is subject to the SFC's official announcement.
Expected to take effect
Covering three types of dealers
You can check it after it takes effect.
Important statement:The RA11 license scheme has not yet officially come into effect. The information below is a profile of potential applicants based on publicly available information and industry analysis, and does not represent a list of licensees already approved by the SFC. Actual license status can be checked through the SFC Public Records after the scheme comes into effect.
全球系統重要性銀行的香港證券實體，目前已持有多類SFC牌照（Type 1/2/7/9等），在港開展大規模OTC衍生工具做市和交易業務。預計制度生效後首批申請11號牌。
The Hong Kong trading entity of large global and regional asset management groups acts as the group's central trading platform to centrally execute OTC derivatives trading for its funds and accounts. These institutions typically hold Type 9 licenses, but their OTC derivatives trading activities extend beyond the scope of portfolio management.
A leading global OTC derivatives broker with a Hong Kong-based entity, facilitating transactions such as interest rate swaps, foreign exchange forwards, and credit derivatives between institutional clients. These institutions do not hold principal positions and focus on matching and execution services.
A Hong Kong entity of globally renowned quantitative hedge funds and proprietary trading firms. Depending on its business model, it may be classified as a general OTCD dealer (if involved in market making) or a central dealer for an asset management group (if only executing trades for funds within the group).
Once the system takes effect, all Type 11 licensed corporations can be instantly accessed through the SFC Public Records.
Inquire about the SFC Public RecordsLicense No. 11 is a new license type introduced by the SFC in 2019 when it amended the Securities and Futures Ordinance, specifically targeting the OTC derivatives market. Its main differences from other licenses are:
(1) The capital requirements are extremely high and the tiered structure is complex (three types of dealers, from HK$15,000,000 to HK$156,000,000 in quick funds).
(2) Involves mandatory transaction reporting and margin requirements;
(3) 考試要求為Paper 1+3+7+9（與RA2、RA5同組）；
(4) It has complex cross-relationships with existing Type 7 and Type 9.
License number 11 divides dealers into three categories:
(1) Central Dealer of Asset Management Group: Paid-in capital HK$30,000,000 + Quick funds HK$15,000,000;
(2) OTCD broker: Paid-in capital HK$60,000,000 + quick capital HK$30,000,000;
(3) General OTCD dealers: The standard requirement is HK$1,000,000,000 in tangible capital + HK$156,000,000 in quick funds (this can be reduced to HK$500,000,000 in tangible capital + HK$78,000,000 in quick funds if eligible). Choosing the right dealer type is the first step in the application process.
It depends on whether your OTC derivatives activities are "entirely subordinate" to portfolio management. If so—for example, a fund manager hedging OTC derivatives for the funds they manage—a Type 9 extended license suffices. However, if your OTC derivatives trading or advisory activities extend beyond portfolio management—for example, providing OTC derivatives trade execution or independent advice to non-fund clients—a separate Type 11 license is required.
According to the SFC's Competency Guidelines updated in October 2024, RA11 is grouped with RA2 and RA5 into the same examination category. Both RO and LR applicants must pass four HKSI LE exams: Paper 1 (Basic Regulation) + Paper 3 (Derivatives Regulation) + Paper 7 (Financial Markets) + Paper 9 (Derivatives). This requirement applies after the new RA11/RA12 licensing regime comes into effect.
自2025年9月29日起，所有持牌法團須以T+2為基礎（交易日後2個工作天內）向香港交易報告儲存庫（HKTR）報告其OTC衍生性商品交易。報告涵蓋五大資產類別：利率、外匯、股權、信用、商品。匯報內容包括一般資訊、結算資訊、估價資訊和後續事件資訊。交易記錄須於交易存續期間及終止後5年內保存。
For OTC derivatives transactions not centrally settled, an initial margin (IM) must be exchanged when the nominal amount between the two parties exceeds HK$30 billion. The variable margin (VM) must be calculated and exchanged daily. The initial margin can be calculated using a standardized margin table or a quantitative portfolio margin model (the use of an internal model requires written approval from the SFC). The initial margin must be held in custody by an independent third party.
從RA11/RA12制度生效日起，過渡期為6個月。現有Type 9持牌人如涉及OTC衍生性交易，可在過渡期內繼續其活動，但須在過渡期前3個月內向SFC提交Type 11牌照申請（如需要）。過渡期申請的審查標準與新申請相同。
The SFC promises a processing time of approximately 15 weeks for corporation license applications. However, for Type 11 license applications, the SFC will conduct a special review of the risk management structure, IT systems, and transaction reporting capabilities. If the materials are insufficient or require amendments, the processing time may be extended to 6 months or even longer. It is recommended to prepare all documents thoroughly before submitting the application.
Type 7 (expanded) covers providing Automated Trading Services (ATS) for OTC derivatives trading, i.e., providing an electronic trading platform for clients to trade independently. Type 11 covers acting as a counterparty, market maker, intermediary, or providing investment advice. If your platform only provides ATS services, Type 7 expansion is sufficient; if it also involves market making or counterparty trading, then Type 7 + Type 11 are required.
According to the SFC's official fee schedule, the annual license fee is charged based on "each class of regulated activity": HK$4,740 per year for corporations per class of RA, HK$4,740 per year for each RO per class of RA, and HK$2,950 per year for each LR per class of RA. The SFC will resume charging the annual license fee from April 1, 2025 (it was previously waived due to the COVID-19 pandemic).
It depends on the type of transaction. Spot forex trading is not considered an OTC derivative and does not require a Type 11 license. However, OTC forex derivatives such as forex forwards, forex swaps, and forex options, if conducted in Hong Kong as a business and involving clients, may require a Type 11 license. Leveraged forex trading falls under Type 3 regulated activities.
AIYING provides full support for Type 11 license applications, including: dealer type assessment and capital planning, license combination strategy advice (optimal combination of Type 7/9/11), transitional application timeline planning, RO candidate qualification assessment and recommendation, compliance system design and setup (including transaction reporting and margin systems), SFC application material submission, and SFC communication during the approval process. Free consultations are available by appointment.
Aiying (License.aiying.cc) specializes in global traditional finance and Web3-related license application and acquisition consulting services. With teams primarily located in Hong Kong, the UAE, and Europe, and strong relationships with local regulators, Aiying has successfully secured applications and smooth operations for leading and mid-tier crypto and traditional institutions. Team members are qualified in Hong Kong, Europe (Ireland), the UK, the UAE, and other jurisdictions, with a global network ensuring XNUMX/XNUMX professional support. Headquartered in Asia, the team brings together experts in operations, marketing, law, regulatory compliance, and accounting, adhering to clients' business objectives to provide comprehensive and in-depth strategies and solutions.
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Through this mechanism, we can ensure that the materials submitted to the regulatory authorities are highly professional, complete and impeccable, thereby minimizing the number of regulatory inquiries and significantly shortening the approval time.And reduced the license rejection rate by 67%.