The Hong Kong Stock Exchange (HKEX) and Digital Asset, a distributed ledger startup have teamed up to explore and develop a blockchain platform for post-trade processing. The reason for this is HKEX Northbound Stock Connect program.
HKEX said that it was looking to follow the Australian Securities Exchange (ASX) in installing settlement transactions on a blockchain-based platform. Digital Asset is also developing that platform as part of a plan to replace the ASX’s aging CHESS clearinghouse system by 2021.
Mainland Chinese investors and oversea’s investors were allowed by Northbound Stock Connect to trade securities in each other’s markets through the trading and clearing facilities of their home exchanges.
Time zone differences across regions four-hour trade and settlement windows, and tight settlement cycle of mainland China trades constrain investors that trade via the system.
The joint venture between HKEX and Digital Asset have successfully completed a functional prototype aimed at resolving these issues.
The trial system enables the real-time synchronization of post-trade status between asset managers, brokers, custodians, and the Hong Kong Securities Clearing Company Limited – HKEX’s securities clearinghouse.
HKEX said it is now planning to engage with a wider base of market participants for the next phase of the proposed platform development.
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