A trading fund is an executive agency, government department or often simply a part of a department, that enables the department to handle its own revenues and expenses separately from overall government finances and more like a business, as opposed to having to obtain funding from the government's legislature and feeding income back into its treasury. A Hong Kong governmental study of trading funds in the UK and Hong Kong describes their nature and purpose as follows:

A trading fund is a financial and accounting framework established by law to enable a government department, or part of a department, to adopt certain accounting and management practices common in the private sector. [The fund] operates on a self-financing basis and does not need to regularly seek funding from the legislature to finance its daily operations after its establishment... the intention [is that such] an institutional change would provide the appropriate flexibility in resource management and nurture a new working culture to improve services in terms of both quality and cost-effectiveness.^[1]

Each country has its own specific laws and regulations controlling the establishment and use of trading funds. Trading funds in the UK were initially established through the Government Trading Funds Act 1973 (c. 63), and modified by the Government Trading Act 1990 (c. 30),^[2] along with other modifications through finance legislation.^[3] In 1993, Hong Kong followed suit with its Trading Funds Ordinance of that year.^[4] Establishment and operation of a Hong Kong trading fund is subject to decisions made by the Legislative Council on the recommendation of the Financial Secretary.

The significance of a UK trading fund is that it has standing authority under the 1973 Act to use its receipts to meet its expenses or outgoings. Some trading funds have, as their main function, the collection and supply of information to both public and private sectors; others do not. Also in the UK, a trading fund can only be established with the agreement of HM Treasury. To establish a fund, more than 50% of the trading fund's revenue will consist of receipts for goods and services provided by the department, and where the responsible minister and the Treasury are satisfied that the setting up of the trading fund will lead to "improved efficiency and effectiveness in management of operations".^[5]

Date of establishment as trading fund is shown: