The Securities and Futures Commission (SFC) said on October 26 that secondary trading had begun in Class F tokenized shares of two funds, under rules set out in its April 20 circular. Retail and professional investors who complete the platform’s onboarding checks can participate.

The new market allows investors to trade the tokens with one another around the clock, but the structure creates particular risks when subscriptions and redemptions are unavailable during weekends and other non-dealing periods.

Why weekends are the weak spot

Previously, holders could subscribe to or redeem fund shares directly with the fund at a net asset value (NAV) calculated once per dealing day. In the secondary market, token prices are instead determined by the prices agreed between buyers and sellers.

On a normal weekday, market prices can remain close to NAV because investors who find tokens trading materially below NAV can buy them and redeem them with the fund at full value. That redemption anchor disappears when dealing is closed while secondary trading continues.

A ChinaAMC filing dated October 23 warns that token prices may diverge further from NAV during weekends and other periods when subscriptions and redemptions are suspended. The filing also says that substantially fewer participants, including market makers, may be active outside normal Hong Kong trading hours.

Market makers, which quote both buy and sell prices, are intended to help maintain liquidity, but ChinaAMC has committed only to using its “best endeavours” to keep at least one market maker quoting. That is an obligation to make reasonable efforts rather than a guarantee that quotes will always be available. Whether quotes actually remain available outside normal Hong Kong trading hours is therefore one of the practical indicators to watch in this market.

The SFC requires platforms to monitor market makers’ spreads and quote sizes. Platforms must also alert investors when prices move significantly away from the indicative NAV, or iNAV. The iNAV is a running estimate refreshed approximately every 15 seconds. Because the fund’s official NAV is struck only once per dealing day, that continuously refreshed estimate is the reference investors can use to judge how far weekend prices have moved away from the fund’s underlying value.

Trading safeguards and fees

Under the rules described in the filing, PantherTrade rejects orders priced more than 4% away from the last matched price recorded five minutes earlier.

The iNAV pauses for five minutes each night, at approximately 23:45 from Monday through Saturday and at 23:30 on Sunday. It can also be unavailable for up to an hour on some Saturdays during system upgrades. Trading may be halted if the iNAV cannot be calculated reliably or if market-making activity is disrupted. Redemptions may continue during a trading halt.

Fees can further widen the difference between a token’s trading price and the underlying fund value. PantherTrade’s published fee information lists a 0.29% taker fee — the charge for orders executed immediately against existing orders rather than resting on the order book — at its lowest volume tier. For a money market fund yielding 3.5% annually or less, that single fee represents at least one month of income, before considering any discount to NAV.

What token buyers actually own

Each Class F token represents one fund share, but the official shareholder register remains off-chain. Tokens traded on PantherTrade are held in an omnibus wallet in the platform’s name and controlled by a token custodian. PantherTrade remains the registered shareholder regardless of how many times the tokens change hands.

As a result, buyers hold a beneficial interest or entitlement against the platform rather than direct registration on the fund’s shareholder register. Investors using a connecting broker add another layer between themselves and the register.

The filing warns that if PantherTrade becomes insolvent, defaults or ceases operations, recovery of tokens held in its name could be limited, delayed or subject to legal proceedings. If the platform lost its SFC licence, holders might be unable to trade, with no assurance that another platform would assume the service.

The arrangement also means the fund register records a single shareholder for all PantherTrade customers collectively. A wallet count can therefore conceal how many individual investors stand behind it.

PantherTrade’s listing notice excludes token deposits and withdrawals for the CAMFF-HKD and CUMFU-USD pairs. Holders who purchased through another distributor must transfer through the fund administrator. Requests are due by the 11:00 a.m. Hong Kong dealing deadline and are settled within one business day afterward.

The exchange-listed share classes, stock codes 3471 and 3472, trade separately on the stock exchange and cannot be converted into tokens.

From a weekend sale to bank cash

A holder who sells on Saturday receives platform cash within an hour, but PantherTrade’s withdrawal terms mean the money reaches a Hong Kong bank account only after the working week begins.

By contrast, a holder who waits until Monday and redeems before the 11:00 a.m. cut-off receives the NAV rather than a market-determined price. The weekend market can therefore serve someone who needs to move funds within PantherTrade on a Sunday. For someone who needs cash in a bank account, waiting for Monday’s redemption window may reach the same destination at a better price.

Source: Coindoo.