{"id":3034542,"date":"2023-10-26T12:30:05","date_gmt":"2023-10-26T17:30:05","guid":{"rendered":"https:\/\/platoaistream.com\/plato-data\/hong-kong-stock-exchange-launches-a-new-blockchain-based-real-time-settlement-platform\/"},"modified":"2023-10-26T12:30:05","modified_gmt":"2023-10-26T17:30:05","slug":"hong-kong-stock-exchange-launches-a-new-blockchain-based-real-time-settlement-platform","status":"publish","type":"station","link":"https:\/\/platoaistream.com\/plato-data\/hong-kong-stock-exchange-launches-a-new-blockchain-based-real-time-settlement-platform\/","title":{"rendered":"Hong Kong Stock Exchange Launches a New Blockchain-Based, Real-Time Settlement Platform"},"content":{"rendered":"
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By Jay Lee<\/a> and Beatrice Wun<\/a><\/p>\n

Hong Kong Stock Exchange (HKEx) recently launched \u201cHKEx Synapse\u201d (Synapse), a new blockchain-based settlement platform to complement the existing post-trade infrastructure for Northbound Stock Connect. \u201cStock Connect\u201d in Hong Kong refers to a market access program through which investors in Mainland China and Hong Kong can trade and settle shares listed on the other market via exchanges and clearing houses in the home market. \u201cNorthbound Stock Connect\u201d refers to the market access program where investors in Hong Kong can have access to shares in Mainland China.<\/p>\n

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With blockchain, a distributed ledger technology, the new system hopes to streamline post-trade processes and workflows, maximising connectivity and efficiencies for market participants in a transparent, secure, and reliable manner.<\/p>\n

A Multiparty Application Framework Built on Smart Contracts<\/strong><\/p>\n

HKEx Synapse seeks to harness \u201cDAML technology,\u201d a multi-party application built on smart contracts, to simultaneously provide real-time settlement instructions and status updates to all parties. Previously, Northbound Stock Connect provided only limited real-time visibility into settlement, and suffered from scalability issues and barriers to participation.<\/p>\n

Blockchain may help remove these pitfalls.<\/p>\n

Key Benefits<\/strong><\/p>\n

HKEx says that it expects to bring more efficiencies to trading and settlement systems by adopting DAML technology. The below table summarizes key benefits of Synapse according to HKEx:<\/p>\n

\n\n\n\n\n\n\n\n
Leveraging existing connectivity <\/td>\nExisting connectivity through collaboration with The Depositary Trust & Clearing Corporation is utilized<\/td>\n<\/tr>\n
Standardized settlement workflows<\/td>\nStandardized manual settlement processes reduce operational risk and improve scalability<\/td>\n<\/tr>\n
Improved transparency<\/td>\nReal-time settlement instructions and status updates improve transparency<\/td>\n<\/tr>\n
Wider adoption of Stock Connect<\/td>\nStandardized settlement workflows attract new entrants to the Stock Connect<\/td>\n<\/tr>\n
Leveraging new technology<\/td>\nDAML, application programming interface (API) and adherence to ISO standards (ISO20022) in electronic data interchange are leveraged<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

HKEx primarily intends to optimize two-way flows of capital between HKEx and capital markets in PRC by removing post-trade inefficiencies. A major pain point which Synapse seeks to minimize is the lack of interoperability in settlement requirements across markets. PRC market\u2019s T+0 settlement cycle differs from T+2 settlement cycle in other jurisdictions. Also, with current processes, a delay or data entry mistake by any party could hold up a transaction. Synapse may address this by providing real-time and simultaneous central matching and instruction to all related participants of trades.<\/p>\n

Together with automated trade confirmations and settlement notifications, HKEx says that Synapse effectively facilitates more standardized, seamless post-trade settlement workflows.<\/p>\n

Participants May Enjoy Real-time Data Synchronization and Improved Market Accessibility<\/strong><\/p>\n

For investors, Synapse may help meet the tight settlement cycle of \u2013 and also enhance the attractiveness of \u2013 PRC securities market. Parties, including asset managers, brokers, investors, and clearing participants may also benefit from real-time data synchronization and improved market access.<\/p>\n

Based on HKEx\u2019s presentations, the launch of Synapse is the product of smart contracts integration, which symbolizes HKEx\u2019s apparent readiness to make major inroads into blockchain applications to bolster post-trading processes. Over time, Synapse may build a more robust stock trading ecosystem warranted by significant trading volumes.<\/p>\n<\/p><\/div>\n