Hong Kong bourse turns to blockchain to boost Chinese share trading

It aims to boost information sharing on northbound trades.

Reuters reports that the Hong Kong Exchanges and Clearing (HKEx) is developing a new blockchain-powered programme that aims to support international investors trade Mainland shares via the Stock Connect schemes.

Also read: HKEx cracks down on backdoor listings

China’s same-day trading and settlement timescale, T+0, has caused problems for investors who usually work on T+2 basis which is two days between trade and settlement.

The Hong Kong prototype taps on blockchain technology to improve information sharing between asset managers, brokers, custodians and the Hong Kong Exchange on northbound trades made through Stock Connect. It also allows asset managers in advance how the shares they have traded should be allocated between their funds.

“The problem at present is that there is a very short time period between when you execute a trade and the settlement cut off time, usually just four to five hours, during which asset managers need to decide how to allocate that trade to their funds, and pass that information down the chain to brokers and custodians,” Lukas Petrikas, co head of HKEX’s innovation lab, told Reuters.

This is particularly crucial for international investors that are trading Chinese shares across different time zones.

The move comes as stock exchanges across the world have been tapping on the technology to boost the speed and efficiency of trade settlements and execution. Last year, the Australian Stock Exchange announced the replacement of its registry, settlement and clearing system with distributed ledger technology in an effort to cut costs.

Here’s more from Reuters: