The Financial Services Commission announced plans to issue new license for fractional investment trading platform services on September 4. The government has been working to establish a new licensing unit to authorize the operation of over-the-counter (OTC) trading services (distribution platforms) regarding fractional investment securities, which offer a fraction of ownership right for various underlying assets (e.g. real estate, music copyright, etc.) to multiple investors. Thus far, fractional investment trading service has been operating under the regulatory exemption program (financial regulatory sandbox). However, as the revision of the Financial Investment Services and Capital Markets Act (FSCMA) and its subordinate regulations is expected to be completed by the end of September, this will establish a legislative foundation authorizing the operation of fractional investment trading platform services.

This follows the earlier capital market rule change in June authorizing the issuance (“primary market”) of fractional investment securities. By the end of September, necessary rule changes will have been completed for authorizing the distribution (“secondary market”) of fractional investment securities. As such, the issuer of fractional investment securities (e.g. a fintech business with necessary securities and investment licenses) will seek to securitize various types of underlying assets to solicit investors, and factional investment securities will be listed on trading platforms for transactions between multiple buyers and sellers.

Plans for Granting New License

New license will be granted to maximum two applicants

Considering that the fractional investment market is still at an early stage and given the need to ensure market efficiency and investor protection through concentration of liquidity, the number of licenses granted this time will be maximum two. If the number of qualified entities is less than two, the final number of entities granted with the new license may be less than two. In this regard, concentration of liquidity will help with more efficient formation of market prices and facilitate investors to more conveniently compare and make investment in multiple products.

En bloc screening when there are multiple applicants

When there are multiple entities applying for new license, the screening of applications will take place en bloc, in which case an external review committee will examine the criteria for qualification, as in the case with the approval of internet-only banks in 2017 and 2021 and that of real estate investment trusts in 2019. To ensure fairness and transparency in the screening process, an external expert review committee will be set up to attribute scores on qualification criteria, and based on these scores, the Securities and Futures Commission (SFC) and the FSC will subsequently make decisions regarding the result of the application screening.

Screening criteria

With regard to the screening criteria, applicants for fractional investment trading platforms will be subject to the licensing requirements specified under the FSCMA. However, additional advantages will be given to those applying in consortium, SME-specialized securities businesses, and applicants with the capacity to launch service quickly. Specific details regarding the screening criteria and the scoring method will be determined by the external review committee.

Further Schedule

When the necessary rule change for authorizing fractional investment trading platform services becomes completed (which is expected to take effect from September 25, 2025), the FSC will announce the license application period (for about one month) and begin to accept applications for preliminary license. When there are multiple applicants, the screening of applications will take place en bloc.

* Please refer to the attached PDF for details.