Introduction to Uncertificated Securities Market (USM) to issuers

At present, there are only two ways to hold securities in Hong Kong listed companies:

1. As a certificated shareholder - that is, by holding paper documents of title issued by the listed company which evidence legal title ownership. The records of certificated shareholders are managed by each company's share registrar.
2. As a beneficial owner holding via HKSCC Nominees Limited (HKSCC-NOMS). In this case, typically, the investor has an account with a Clearing Participant or Custodian Participant (CP i.e. intermediaries such as a bank or broker) but HKSCC-NOMS holds the legal title to the securities, with the investor listed as a beneficial owner by the bank or broker.

The current set-up has some limitations:

• A certificated shareholder can only trade their securities on market by having their paper certificates deposited by a CP (such as a bank or broker). If an investor purchases securities but wants to hold legal title in their own name, they must ask their intermediaries to withdraw the securities from the Central Clearing and Settlement System (CCASS) and then have new certificates printed. The need for conversion from and back to paper imposes significant delays and inefficiencies in the market, as well as being less environmentally sustainable.
• As title holders, HKSCC-NOMS is responsible for handling a wide range of actions on behalf of beneficial holders - distributing dividends, interest and bonus securities, and collecting participant instructions for corporate events such as rights issues or voting on meeting resolutions. Having an intermediary between beneficial holders, issuers and their registrar create friction – additional time and costs to fulfil these actions – and less transparency from the issuer’s point of view.

Going digital – the Uncertificated Securities Market (USM)

In recent decades, global securities markets have adopted digital-first systems of title, record-keeping, communications and transaction processing. Printed forms, mailed letters and cheques have increasingly been replaced with web-based forms, online voting, email and electronic funds transfers. This has enhanced shareholder participation and benefits without any lessening of their rights.

From November 2026 on, Hong Kong will start replacing the issuance of paper-based title instruments (such as paper share certificates) with a wholly digital system for recording title. The process for converting from physical title documents to electronic book-entry systems (uncertificated securities) is known as dematerialisation.

In 2021, Hong Kong enacted an ordinance to establish the framework for the implementation of an Uncertificated Securities Market regime – USM for short. Further legislation has been enacted to cover the operation of the new USM regime, the regulation of Approved Securities Registrars (ASRs), and other particulars such as allotments, transfers, lost share certificates and new methods for collecting stamp duty relating to transfers.

Since the USM Amendment Ordinance was enacted, regulators, registrars and the HKEX have worked together to develop a model for implementing USM by the proposed start date in 2026. The model was finalised in 2024.

Computershare has committed considerable resources and expertise, both locally and globally, to fulfil the technical, operational and regulatory requirements to become an ASR under USM. Having already completed similar dematerialisation projects in other jurisdictions, we’ve been able to leverage our strong track record to play a leading role in the development of the USM model for Hong Kong.

Moving to USM

The move to an uncertificated market in Hong Kong has two main aspects:

1. Phasing out paper share certificates and replacing them with a new digital form of legal title

The new way for investors to view and manage their holdings will be using a USI facility, implemented and operated by the relevant ASR for each issuer of a participating security. This facility provides registered holders with secure digital systems to monitor, manage and control their uncertificated holdings, including initiating or affirming transfers.

The provision of digital platforms will give investors greater visibility of their holdings and more efficient ways of managing them, while also having the protection of retaining legal title at all times.

The USI facility will interface with the Hong Kong Stock Exchange’s settlement system (CCASS)  via secure digital channels, streamlining the day-to-day operations of the market.

Computershare is creating a mobile app for shareholder to manage their securities easily, efficiently and securely online.

2. Expanding the role for registrars in the Hong Kong market

Due to the vital role of the new USI facility and the increased importance of the digital title and secure digital transactional systems, only registrars that have passed an exacting series of SFC accreditation checks will be authorised to maintain a register of securities under USM; these will be known as Approved Securities Registrars (ASRs).

ASRs will operate a secure digital interface with the CCASS, reducing processing time for transfers and settlement, and replacing a range of manual, paper-based processes.

While all exchange trades will continue to be settled in CCASS via HKSCC-NOMS, investors who purchase securities can choose to hold digital title in their own name by supplying their USI name and identifier to their broker to initiate a withdrawal. Once the transfer is complete, the securities will be recorded in the investor’s name on the digital Register of Holders (ROH, maintained by the ASR). For such holdings, the company’s ASR will manage all communications and corporate events directly, improving efficiency and timeliness.

When a holder wishes to sell uncertificated securities that are held in their own name on the market, they will need to instruct their broker to initiate a deposit to HKSCC-NOMS and affirm the transfer of those securities to the broker’s CCASS account. Computershare’s platform for investors will provide shareholders with a simple way to approve these transfers.

Computershare is making substantial investments to facilitate the transition to USM. Over time, as paper share certificates are progressively dematerialised, shareholders' ability to transact digitally will enable quicker and more efficient operations. These benefits will take time to be fully realised, though, given some investors will opt to retain their certificates.

The scope and timeline for USM

The initial scope of USM is for listed companies incorporated in Hong Kong, Bermuda, the Cayman Islands, and Mainland China. This constitutes the vast majority of issuers listed on HKEX. It is expected that issuers from other countries will be introduced in a later phase of the USM regime. This will allow lead time for any changes required for USM to align with corporate law in their own jurisdictions.

Securities within the scope of this initial phase of USM are referred to as prescribed securities. When they are migrated to USM, they become participating securities.
Subject to the passage of relevant subsidiary legislation and finalisation of operational details, the initial implementation of USM is scheduled for 16 November 2026. The primary significance of this date is the requirement for all HKEX listed issuers to have ASRs as their registrar, regardless of the timing of the issuer’s securities becoming participating securities.

Because of the scale of the work ahead, the transition of securities to USM will need to take place in an orderly schedule over several years. By law, all eligible issuers of prescribed securities that are listed on HKEX at the start date must complete the required steps within 5 years.

The transition to USM will be relatively simple for listed companies. The bulk of the changes required will be carried out by your ASR and HKSCC-NOMS. Consequently, your choice of ASR is crucial – the capabilities of your registrar will be fundamental to the success of your company’s conversion to USM, and to the ease with which shareholders can participate in the dematerialisation process.

USM from the perspective of investors

It is important to note that there are no mandatory actions for investors following the implementation of USM. There will be no impact on investors who retain beneficial ownership of securities held by HKSCC-NOMS HKSCC Nominees Limited. Those who hold paper share certificates in securities that have been migrated to USM will not need to dematerialise them to participate in corporate events, receive dividends or attend company meetings and vote on resolutions.

ASRs will continue to provide all services currently available to certificated holders. Computershare is committed in supporting Issuers with communications and education to their shareholders. Our newly renovated counter is now open for with upgraded shareholder experience. The new counter features a ticketing system for improved time management and an investor education space in anticipation of USM launching.

Why you should appoint Computershare as your Approved Securities Registrar

Our team

Computershare’s advantage is our unique combination of local talent and global expertise. Our Investor Services teams have extensive experience in Hong Kong and China markets; this is supplemented by many people in other countries who have led similar projects in their own jurisdictions. These include leaders in technology, a crucial element in enabling USM and the enhanced services that follow.

These are some of the key members of our USM team, in Hong Kong and further afield.

Next steps

This introductory information is the first we will be releasing. While our primary focus will be providing you with details on the topics that are most useful to issuers, we will also be publishing guides for your shareholders, carefully crafted to make USM easy for them to understand. These will provide clear guidance on the actions they can take to gain the full benefits of USM, as well as how to use the new platform we will provide to streamline their journey. More broadly, Computershare is committed to providing leadership across the Hong Kong market as a whole, to ensure all market participants are well prepared for the introduction of the USM regime.

Resources

• Federation of Share Registrars Limited (FSR)
  Information Paper for Issuers and Shareholders – Implementation of an Uncertificated Securities Market (USM) in Hong Kong
• Hong Kong Exchange
  Useful information for intermediaries
• SFC
  Information on Uncertificated Securities Market

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