Hong Kong’s market regulator capped the amount of margin loans that can be used to buy shares at initial public offerings to clamp down on excessive demand from retail investors.

The Securities and Futures Commission will require retail investors to put in downpayment of at least 10 percent when taking out a margin loan for IPOs, according to a circular issued Thursday. That means brokers will only be able to extend margin loans of as much as 90 percent of the cost of subscribing to the IPO shares.

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The move is a response to a recent IPO market frenzy that triggered first-day share price pops and concerns about retail investors getting burned. The hype was driven partly by easy brokers’ loans — sometimes carrying interest rates as low as 0 percent — following the stock exchange’s new settlement system known as FINI.

Some local brokers “were found to have engaged in imprudent and aggressive IPO financing practices by accepting subscription orders that exceed their clients’ financial capabilities,” the SFC said in a statement.

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The FINI system shortened the pricing-to-listing period and allowed investors to pay after shares are actually allotted. The tweaks have ushered in multiple mega-hit IPOs in the city, with retail investors oversubscribing by thousands of times.

Oversubscriptions trigger an arrangement known as the clawback mechanism, which effectively moves the new shares from the institutional side to retail investors.

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The Hong Kong stock exchange has just closed a market consultation to limit clawbacks, hoping to keep more shares for institutional investors. The SFC also reviewed eight brokers with the highest IPO oversubscriptions.

 “Our association firmly support the SFC’s measure on market risk management,” said Katerine Kou, chair of Hong Kong Securities Association, which represents local brokers.