- The Hong Kong Stock Exchange’s Stock Connect system will upgrade to a system that uses blockchain technology to streamline post-trade processes and lower settlement risks.
- Synapse is Hong Kong’s answer to scaling its creaking settlement system
- Stock exchanges in London and Australia are also looking into blockchain-based solutions
The Hong Kong Stock Exchange’s Stock Connect system, which has been instrumental in linking Hong Kong’s stock markets with those in mainland China, is set to undergo a significant upgrade leveraging the power of blockchain technology. This enhanced version, named Synapse, is poised to revolutionize the post-trade workflows and mitigate settlement risks through the implementation of smart contracts. The new platform is set to go live on Monday and echoes advances made in other countries.
Synapse Using Blockchain to Revolutionize Trading
Synapse boasts the ability to generate settlement instructions for all involved parties within the settlement chain simultaneously. This simultaneous processing capability streamlines settlement procedures and provides near-instant status updates to all participants in the trade, even when they are operating in distinct markets. Such real-time communication is crucial for connecting traders across borders and markets.
In the first half of 2023, the Stock Connect system recorded an impressive average daily turnover of $15.3 billion. This figure represents a notable 5% increase compared to the previous year and a substantial 50% rise from 2020 levels. The Stock Connect’s enduring success underscores the importance of continuous innovation to maintain efficiency and reduce risks in the financial industry.
Hong Kong Not Alone
Hong Kong’s move towards integrating blockchain technology into financial systems is not unique, with the Australian Securities Exchange considering recommendations to embrace blockchain as a replacement for its existing settlement system known as CHESS. These developments reflect a broader trend in the financial sector, where blockchain is being recognized for its potential to enhance transparency, security, and efficiency in settling financial transactions.
The London Stock Exchange is also working on integrating blockchain technology in order to keep up with evolving markets.
The impending launch of Synapse in Hong Kong, scheduled for October 9, marks an exciting milestone in the application of blockchain technology to streamline and enhance the functioning of financial markets. As the adoption of blockchain continues to grow, it has the potential to reshape settlement processes and revolutionize the way financial institutions conduct business, ultimately benefiting market participants and investors alike.
