Hong Kong Exchange and Clearing Limited (HKEX) is teaming up with Digital Asset to build a blockchain platform for post-trade allocation and processing of northbound trades under the Stock Connect programme with China.
Stock Connect is a collaboration between HKEX and the Shanghai and Shenzhen stock exchanges that lets international and mainland Chinese investors trade in each other's markets through their home exchanges' platforms.
HKEX has been testing a prototype system for Stock Connect using Digital Asset's platform and smart contract modelling language in an effort to accelerate the post-trade process and reduce settlement risk.
The project explored how DLT could enable HKEX market participants to specify settlement workflows in advance - helping to bridge time zones - while enabling real-time synchronisation of post-trade status between asset managers, brokers, custodians and HKEX’s clearing house.
Now, the two are forging ahead with a full service, calling on market participants to sign up for the post-trade allocation and settlement initiation platform for the northbound Stock Connect programme.
The plan was unveiled by HKEX CEO Charles Li at Hong Kong Fintech Week, where he claimed that blockchain tech could alleviate the post-trade operational challenges faced by the exchange's market participants and global investors that trade China-listed A-shares via Stock Connect due to the tight settlement cycle for Mainland China trades.
"This could be the beginning of a long journey of innovation and revolution and we’re very excited to share this important milestone," Li told his audience.
This is not HKEX's only foray into DLT. Last year it unveiled plans to launch a private market to provide early stage companies with a blockchain-based share registration and transfer platform for the conduct of pre-IPO financing off-exchange and clear of the regulatory remit of the Securities and Futures Ordinance.
Separately, Ping An Insurance has delivered Hong Kong's first blockchain-based international trade finance platform. Dubbed OneConnect, the system has seven founding bank members, including ANZ, Bank of China and Standard Chartered.
The DLT platform will let members access real-time, secured and comprehensive trade information to conduct their risk assessment on loans, boosting efficiency and potentially reducing costs.