Hong Kong IFEC flags risks of trading tokenized funds on the secondary market

October 28: Hong Kong's Investor and Financial Education Council (IFEC) has published a notice flagging the risks of buying and selling tokenized funds on the secondary market, including price discrepancy/trading risk, liquidity risk, price fragmentation risk and reliance on market makers.

The IFEC noted that investors should thoroughly understand the underlying fund, including its investment objectives, strategy, features, operation and related investment risks, as well as the tokenization arrangements, including whether transactions are ultimately settled on-chain or off-chain and the associated risks. Investors should pay attention to information on the trading channel, market maker arrangements, applicable fees, circumstances in which trading may be suspended, the risks of secondary market trading, and the option to subscribe for or redeem tokenized fund units at net asset value, together with the related implications.