Hong Kong Stock Exchange Launches Blockchain-Powered Settlement System

By Sharan Kaur Phillora

The Hong Kong Stock Exchange has introduced Synapse, a blockchain-based settlement platform. This state-of-the-art system, which enhances the existing Stock Connect program that links Hong Kong’s stock markets to mainland China, leverages blockchain technology and smart contracts to refine post-trade workflows and mitigate settlement risks.

Here’s what we know:

According to details released, Synapse can produce settlement instructions concurrently for all entities in the settlement chain. This allows for simultaneous processing and delivers near-instantaneous updates to every party involved in a trade—a crucial feature when coordinating trades across distinct markets.

Notably, this innovation comes as Stock Connect’s average daily turnover reached a commendable $15.302 billion (or 109.3 billion RMB) in the initial half of 2023. This marks a 5% jump from the previous year and a substantial 50% surge from 2020 figures.

Incorporating the DAML programming language, Synapse is designed to augment operational efficiency. It will be integrated into Stock Connect, an initiative by HKEX, providing international investors a gateway to over 1,000 mainland Chinese stocks via Hong Kong.

Further enhancing this streamlined workflow, HKEX will connect to Hong Kong’s Depository Trust and Clearing Corporation via its Institutional Trade Processing service. This connection promises centralized matching of cross-border transactions, with settlement instructions promptly relayed back to Synapse.

Hong Kong’s push into advanced technologies is evident with its growing emphasis on Web3 firms, bolstered by the recent initiation of retail trading for licensed crypto exchanges. Nevertheless, the region hasn’t been without challenges, as seen with the JPEX crypto exchange debacle, where a staggering $166 million was allegedly siphoned off in what is touted as Hong Kong’s largest Ponzi scheme. Investigations are currently underway.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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