In a bid to improve the post-trade processes and settlement risk that has plagued the Hong Kong Stock Exchange, the popular exchange platform has teamed up with Blockchain startup Digital Asset in order to face the challenge squarely.
According to a report by financial news platform Finextra on October 31, the Hong Kong Exchanges and Clearing Limited (HKEX) has partnered with blockchain firm Digital Asset to accelerate the post-trade process in order to improve the efficiency of the exchange and attract more players into the trading sector.
Reportedly, HKEX had been working in conjunction with Digital Asset to experiment a prototype system “in an effort to accelerate the post-trade process and reduce settlement risk.” It was further revealed that the system was tested by HKEX and the Shanghai and Shenzhen stock exchanges, in a partnership described as “Stock Connect.”
The Stock Connect initiative has proven to be a commendable project with its capacity to let international and mainland Chinese investors’ trade in the individual market through their traditional exchange platform. This will necessarily go a long way to improve the efficiency of northbound trades.
The report also hinted on the plans of the collaborating institutions to release a service platform with the intention to the usual problem of time differences and other inconsistencies in the modus operandi of the exchange. Also, there are plans to address operational issues for northbound traders via Stock Connect that erupts “due to the tight settlement cycle for Mainland China trades.”
HKEX’s Perfect Blockchain Partnership
Just about a week ago, the HKEX published a report proposing that crypto and blockchain be regulated in line with the existing regulatory framework. The exchange laid emphasis on what it considers as improper. The exchange stated that blockchain and other fintechs like artificial intelligence (AI) should fall within the securities regulations instead of the classifying under banking, Internet finance or digital currencies which is more like a custom for most regulator watchdogs.
Earlier in September, we witnessed a release (though by an anonymous source) revealing that HKEX is seriously on an acquisition quest and the preferred area seemed to be the blockchain sector as well as other closely-related sectors. This report must have erupted from the firm’s issues with trading connections with Chinese exchanges.
In the actual sense, this report came as a confirmation to the speculation that the exchange is considering a partnership with blockchain startups or even acquiring one just to improve the post-trade process. We can only hope that this partnership achieves its objective.