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Hong Kong Exchange Prepares for Blockchain Trading Platform

Last Updated March 4, 2021 3:06 PM
Jimmy Aki
Last Updated March 4, 2021 3:06 PM

Hong Kong Exchange and Clearing Limited (HKEX) has joined forces with Digital Asset to develop a blockchain platform for post-trade allocation and processing of trades.

This alliance was created under the Stock Connect programme with China, based on a FinExtra report . HKEX had been working on a prototype system for Stock Connect using Digital Asset’s platform and smart contract modeling, as it attempts to speed up the post-trade process and reduce settlement risks among traders.

This plan was made known by HKEX CEO Charles Li at a tech event in Hong Kong, where he argued that the distributed ledger technology could be used to limit the “post-trade operational challenges” faced by HKEX’s market participants and global investors who “trade China-listed A-shares via Stock Connect due to “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 had remarked.

HKEX has been quite busy experimenting with meaningful use cases for the blockchain technology.

Early last year, it announced plans to launch a private market where startups can acquire a blockchain based share registration , conduct pre-IPO financing and get all the regulations needed from the financial regulatory.

Also, Hong Kong-based blockchain startup developed OneConnect , a blockchain based international trade finance platform for businesses to “access real-time, secured and comprehensive trade information to conduct their risk assessment on loans, boosting efficiency and potentially reducing costs.”

Stock Connect is a collaboration between the Hong Kong stock exchange and its Shanghai and Shenzhen counterparts. The collaboration aims to provide investors from member nations trade in each other’s market using their country’s stock exchange platform.

A statement from the report reads:

“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 synchronization of post-trade status between asset managers, brokers, custodians, and HKEX’s clearing house.”

The stock exchange leaders from the member countries have rolled out the service and have called on market participants in Hong Kong and China to “sign up for the post-trade allocation and settlement initiation platform for the northbound Stock Connect programme.”

Featured image from Shutterstock.