Yesterday Hong Kong Exchanges and Clearing Limited (HKEX)
announced that it’s partnering with Digital Asset to use blockchain for post-trade processing and to reduce settlement risk. This follows the successful completion of a prototype.
HKEX is trying to solve an issue that’s very specific to Hong Kong. In most jurisdictions settlement takes two days, whereas in mainland China it takes four hours. HKEX’s Stock Connect system enables international investors to trade mainland China shares, referred to as “northbound” trading.
The problem is that settlement happens in the middle of the night for some of these international investors. And asset managers have to decide how to allocate the trade to particular funds. Based on that decision the information needs to be synchronized with other participants such as brokers, custodians, and HKEX’s clearing house.
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