Yesterday Hong Kong Exchanges and Clearing (HKEX) announced it will go live on Monday with HKEX Synapse, a smart contract driven platform. It helps with the post trade processes for Northbound Connect, which involves HKEX providing a conduit for foreign investors that trade stocks on the mainland Shanghai Stock Exchange. Synapse uses Digital Asset‘s DAML smart contract language.
Over the past four years, Northbound Connect has seen transaction growth of 870%. However, the current post trade processes are challenging because China settles transactions on the same day rather than the T+2 used in Hong Kong and in many other jurisdictions. With the different time zones, transactions settle during the night for Americans.
Additionally, most of the conventional post trade processes happen sequentially, meaning a delay by any party can hold up a transaction. In contrast, HKEX Synapse shares the data with all participants simultaneously – the ‘single source of truth’. Hence the clearinghouse, local and global custodians all see the same data. Synapse is integrated with DTCC infrastructure, including its central trade matching platform CTM.
“This technology-empowered platform will not only improve post-trade efficiencies, but will, over time, build a better, stronger ecosystem, supporting both market growth and investor growth strategies,” said Glenda So, HKEX Group Head of Emerging Business and FIC.
HKEX first revealed it was working on the solution three years ago. At the time it was only interested in the automation enabled by DAML smart contracts, and less so the blockchain. However, blockchain is now integrated with DAML 2.0.
This is not the only blockchain solution that HKEX is exploring. It is also working on the “Diamond” digital asset trading venue that aims to support multiple asset clases and round the clock availability. Andrew Loong was appointed as head of digital assets earlier this year.