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August 22, 2024
Arthur Yu Chen
Chief Financial Officer
Futu Holdings Ltd
34/F, United Centre
95 Queensway, Admiralty
Hong Kong S.A.R.
People's Republic of China
Re: Futu Holdings Ltd
Form 20-F for Fiscal Year Ended December 31, 2023
File No. 001-38820
Dear Arthur Yu Chen:
We have limited our review of your filing to the financial statements
and related
disclosures and have the following comments.
Please respond to this letter within ten business days by providing the
requested
information or advise us as soon as possible when you will respond. If you do
not believe a
comment applies to your facts and circumstances, please tell us why in your
response.
After reviewing your response to this letter, we may have additional
comments.
Form 20-F for Fiscal Year Ended December 31, 2023
Item 4. Information on the Company
B. Business Overview, page 84
1. We note your use of and definition that "paying clients" are "clients
with assets in their
trading accounts with you". With a view towards enhancing your
disclosures in future
filings, tell us how client account assets always result in payments to
you. Excluding
products and services disclosed on pages 89 through 94 that appear to
have separate and
distinct performance obligations aside from the existence of account
assets, it is unclear
how clients with assets would always be paying clients.
August 22, 2024
Page 2
Item 5. Operating and Financial Review and Prospects
Key Components of Results of Operations
Revenues
Brokerage commission and handling charge income, page 175
2. We note your disclosures on pages 82 through 89, and 175, including that
you generate
commissions and execution fees on securities brokerage by trading
equities and equity-
linked derivatives, the various securities dealer licenses you hold, and
that you provide
trade execution services for stocks, ETFs, warrants, options and
futures, across different
markets. Considering also your growth, both organically and by
acquisition, for the
periods presented, represent to us that in future filings you will
disclose the following:
Disaggregate total brokerage commissions and handling charge income
by product,
i.e. equities, equity-linked derivatives by type and provide
explanations for period
over period changes;
Disaggregate total brokerage commissions and handling charge income
by geography
and provide explanations for period over period changes; and
Disaggregate total trading volume by product and provide
explanations for period
over period changes.
Refer to Item 303(b)(2) of Regulation S-K. Otherwise, tell us why these
disclosures are
not warranted.
Interest Income, page 175
3. We note that interest income was 55% of total revenue in 2023,
increasing from 42% in
2022 and 35% in 2021. We also note that while bank deposits and
securities lending were
the main drivers of the increase in interest income, margin financing
was 18% of total
revenues in 2023, 21% in 2022 and 24% in 2021. Considering the
significance of interest
income to total revenues, as well as the change in drivers of total
interest income for the
periods presented, please represent to us that you will enhance your
disclosures in future
filings to provide a yield analysis that addresses the following:
Disaggregates interest income, based on the underlying interest
earning assets, i.e.
bank deposit, margin financing, securities lending, etc. as
presented in Note 19 to
your financial statements on page F-47;
Presents for each category of interest earning assets and in the
aggregate, the
average asset balance outstanding for the periods presented and the
annualized yield
based on the related average interest earning balance;
Separately indicates the basis used to calculate the average asset
balances; and
Discusses the drivers resulting in changes in yields for each
category of interest
earning assets period over period.
Refer to Item 303(b)(2) of Regulation S-K. Otherwise, tell us why these
would not
provide meaningful information to investors.
August 22, 2024
Page 3
Results of Operations
Revenues
Brokerage commission and handling charge income, page 180
4. You identify trading volume and blended commission rate as the main
factors driving
brokerage commission and handling charge income despite the decline in
trading volume
from HK$4.9 trillion in 2022 to HK$4.2 trillion in 2023 and an increase
of 1 bps. In an
effort to inform investors to the dynamics and sensitivity of your
earnings from users,
clients and market factors, please represent to us that in future filing
filings you will
present the table of growth of your platform in terms of users, clients
and client assets for
the periods presented, as disclosed on page 99, in addition to the
discussion of trading
volume and blended commission rate for the periods presented. Refer to
Item 303(b)(2) of
Regulation S-K. Otherwise, tell us why this disclosure would not be
meaningful to
investors.
Notes to Consolidated Financial Statements
Note 2. Significant Accounting Policies
Revenue Recognition, page F-25
5. With a view toward enhancinge your revenue recognition policy in future
filing, please
address the following:
Tell us your performance obligations, how you satisfy them,
including if you act as a
principal or agent in the transaction, and the parties to the
respective transactions;
If you act as a principal in transactions, tell us the financial
statement impact of
unsettled transactions;
Clarify how the timing of satisfaction of your performance
obligation(s) relate to the
timing of payment and the affect to your financial statement
accounts; and
Explain whether commissions can be variable and if you provide
volume tiered
discounts and if so, how you account for this variablility.
Refer to ASC 606-10-50.
Note 18. Brokerage Commission and Handling Charge Income, page F-46
6. You disclose on page 89 and elsewhere that your services allow customers
to trade
securities, such as stocks, ETFs, warrants, options and futures, across
different markets.
Please represent to us that you will enhance your disclosure in future
filings to provide the
following:
Disaggregation of revenue by the various securities indicates above,
as required by
ASC 606-10-50 paragraphs 5 through 7.
Revenues and long-lived assets by geographic areas, including the
basis for
attributing revenues to individual countries, as required by ASC
280-10-50-41.
If you do not believe these disclosures are required, tell us why in
your response.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
August 22, 2024
Page 4
Please contact Michelle Miller at 202-551-3368 or Mark Brunhofer at
202-551-3638 with
any questions.
Sincerely,
Division of Corporation
Finance
Office of Crypto Assets