The Hong Kong Stock Exchange (HKEX) collaborated with Digital Asset, the distributed accounting firm for the development of a blockchain platform for post-trade processing.
The two companies are exploring the development of a blockchain-based platform for the HKEX Northbound Stock Connect program, a spokesperson for HKEX told CoinDesk.
The news comes later HKEX revealed in March that he was watching Follow the Australian Securities Exchange (ASX) in putting settlement transactions on a blockchain-based platform. In particular, Digital Asset is also developing that platform as part of a plan to replace the obsolete CHESS clearing house system of ASX by 2021.
Launched in 2014, Northbound Stock Connect enables international and mainland China investors to exchange securities in their respective markets through the trading and clearing structures of their national stock exchanges.
Currently, investors trading through the system are limited by the tight settlement cycle of Mainland China's commercial activities, with only a four-hour window to complete the trade and settlement. Time zone differences between regions further complicate post-negotiation processing.
HKEX has declared that it has already completed a functional prototype together with Digital Asset aimed at solving these problems. The prototype allows a group of market participants to specify liquidation workflows early and thus helps to overcome time zone differences.
In addition, the test system enables real-time synchronization of post-trade status between asset managers, brokers, custodians and the Hong Kong Securities Clearing Company Limited – the HKEX clearing house.
HKEX has stated that it is planning to engage with a broader base of market participants for the next phase of development of the proposed platform.
Elsewhere, a number of stock exchanges are looking at blockchain as a means of improving clearing and settlement, and other processes, including in Singapore and India.
Just last week, the German central bank and Deutsche Börse, owner of the Frankfurt Stock Exchange, completed a blockchain test to investigate the potential of technology in securities regulation.
Stock image through Shutterstock