Hong Kong Stock Exchange Embraces Blockchain for Seamless Settlements

A blockchain-powered improvement is planned for Hong Kong’s Stock Connect system, a link between its stock exchanges and those in mainland China. Smart contracts will be used by this ground-breaking improvement, dubbed Synapse, to speed post-trade procedures and reduce settlement risk.

Investors wishing to access the markets of Hong Kong and mainland China can do so using the Stock Connect system of the Hong Kong Stock Exchange. This mechanism makes international business and investment easier. The way Stock Connect functions is about to change thanks to the launch of Synapse.

The Power of Smart Contracts

Smart contracts are used by Synapse to automate post-trade procedures with unparalleled efficiency. All parties involved in the settlement chain will get settlement instructions from these contracts at the same time. This not only speeds up the procedure but also provides all interested stakeholders with nearly rapid status updates, providing smooth interaction between traders in various marketplaces.

Over time, there has been a notable increase in the usage of the Stock Connect system. Its daily transaction averaged an astounding $15.302 billion (109.3 billion RMB) in the first half of 2023 alone. In comparison to the prior year, this marks a substantial 5 percent gain, and from 2020 levels, it represents an astounding 50 percent growth. The system’s ongoing growth highlights its importance in the world of finance.

A more widespread worldwide trend is represented by Hong Kong’s decision to integrate blockchain technology into its Stock Connect system. Blockchain’s potential has also been recognized by other financial institutions, like the Australian Securities Exchange (ASX). As an illustration, ASX has investigated switching to blockchain from its CHESS settlement system.