Applying blockchain technology to the trading system, the execution, clearing and settlement in the transaction process can be carried out at the same time, reducing the time consumption of settlement.
Recently, the Hong Kong Stock Exchange (SEHK, Stock Exchange of Hong Kong) plans to develop a new transaction settlement system and explore the application of blockchain technology in the system.
It is reported that the Hong Kong Stock Exchange (SEHK, Stock Exchange of Hong Kong) will cooperate with Blythe Masters Digital Asset Holdings LLC to establish a blockchain settlement system for mainland stock transactions.
Li Xiaojia, chief executive of Hong Kong Stock Exchange, said at a technology company forum on Tuesday that the trading platform will simplify the northbound (stock trading with Shenzhen and Shanghai) trading process under the Stock Connect mechanism. The reason for the simplification is mainly because the same-day settlement system is used in China, and it is difficult for international investors who are accustomed to a longer process to complete transactions in a timely manner, and difficulties arise in this transaction link.
In terms of streamlining the process, market infrastructure adjustments are required. Li Xiaojia said that in addition to the tool adjustment of the trading platform, the Hong Kong Stock Exchange is still considering how to upgrade the post-trading system, and plans to reduce the cost and risk of the system within three to four years, and this upgrade takes into account the use of blockchain technology to accomplish.
HKEX did not provide a deadline for rolling out the system, but said in a statement on the forum that a functional trading prototype had been built. The new trading system allows traders to arrange settlement details in advance, facilitating coordination among brokerages, asset managers and custodians, the statement said.
On the one hand, the Hong Kong Stock Exchange’s move is to simplify the process and provide convenience for international investors; on the other hand, it is following the example of its competitor Nasdaq and actively using high-tech to improve the company’s business.
In the United States, many companies are already using technology that combines blockchain and settlement systems. For example, Nasdaq applies blockchain technology to its non-public market platform to provide support for the issuance, transfer and management of securities of non-publicly listed companies; the American Depository Trust and Clearing Corporation (DTCC) cooperates with IBM, Axoni and Organizations from the R3 consortium have completed testing a system that uses blockchain and smart contracts to manage and clear post-trade services in the over-the-counter bilateral credit derivatives market, which is understood to be worth $11 trillion.
