Hong Kong Stock Exchange to Enhance Stock Connect with Blockchain Technology
The Hong Kong Stock Exchange (HKEX) is planning to improve its Stock Connect system, which connects Hong Kong’s stock markets with mainland China, by incorporating blockchain technology. This upgrade, called HKEX Synapse, aims to enhance market efficiency and transparency by using smart contracts to facilitate post-trade workflows and reduce settlement risk.
Introducing HKEX Synapse
HKEX Synapse is an integrated settlement acceleration platform that extends the capabilities of Stock Connect. It leverages DAML (digital asset modeling language) smart contracts to standardize and streamline post-trade workflows, resulting in operational efficiencies and reduced settlement risks.
Real-Time Updates and Increased Turnover
With Synapse, settlement instructions can be simultaneously created for all parties involved in the process, providing real-time updates. This feature is particularly important for connecting traders in different markets. The average daily turnover of the Stock Connect has increased by 5 percent compared to the previous year, reaching $15.302 billion in the first half of 2023.
Enhanced Visibility and Insights
Synapse eliminates sequential processes and offers real-time visibility and insights into the settlement process for all market participants. This allows asset managers, brokers, custodians, and clearing participants to better handle the growing volume of trades through Northbound Stock Connect.
Launch Date and Industry Significance
HKEX Synapse is set to launch on October 9, 2023. This move positions HKEX as a leader in integrating blockchain technology into traditional financial systems. It reflects the broader trend of financial markets adopting blockchain to improve efficiency and transparency. Hong Kong’s efforts to become a crypto business hub also align with this innovation, as the country recently launched Asia’s first crypto futures ETFs and is attracting major crypto firms.
Hot Take: HKEX Synapse Revolutionizes Stock Connect with Blockchain
The integration of blockchain technology through HKEX Synapse marks a significant milestone for the Hong Kong Stock Exchange. By leveraging smart contracts and real-time updates, this upgrade enhances market efficiency and reduces settlement risk. It also positions HKEX at the forefront of blockchain integration in traditional financial systems, showcasing the industry-wide trend of embracing blockchain for increased transparency and operational effectiveness. As Hong Kong continues to make strides in the crypto space, this innovation further solidifies its position as a leading hub for crypto businesses. The launch of HKEX Synapse on October 9, 2023, will undoubtedly have a transformative impact on post-trade operation management for institutional investors participating in Northbound Stock Connect.
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