Hong Kong Stock Exchange to Launch 'Synapse', a Smart Contract Powered Settlement Solution

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The Hong Kong Exchanges and Clearing Limited (HKEX), in collaboration with The Depository Trust & Clearing Corporation (DTCC), is launching ‘HKEX Synapse’ - a new integrated settlement platform that uses smart contracts to facilitate greater market efficiency and transparency.

The Synapse will be available on Stock Connect, an HKEX channel that links the Hong Kong and Mainland China equity markets. It will allow investors to access 1,000 mainland Chinese stocks through routing in Hong Kong.

Set to launch on October 9, 2023, the platform will deploy DAML smart contracts to standardise and streamline post-trade workflows, enhancing operational efficiencies and transparency while reducing settlement risks.

HKEX Synapse will eliminate sequential processes, offering real-time visibility and insights into the settlement process for all market participants. Real-time data synchronisation and improved scalability will benefit asset managers, brokers, custodians, and clearing participants.

The platform will be linked with The Depository Trust & Clearing Corporation (DTCC) through its Institutional Trade Processing (ITP) service. The integration will allow global investors and HKEX participants to benefit from the central matching of cross-border transactions using DTCC’s CTM service. Settlement instructions will be automatically generated and sent to the Synapse platform, streamlining the trade confirmation and settlement notification process.

Glenda So, HKEX Group Head of Emerging Business and FIC, showed excitement on the launch of HKEX Synapse. While highlighting its importance, she said, “This technology-empowered platform will not only improve post-trade efficiencies, but will, over time, build a better, stronger ecosystem, supporting both market growth and investor growth strategies. We are very proud to be introducing Synapse to our market and we look forward to continuing to embrace new technologies that benefit our markets and our customers in the future.”

Other financial exchanges have also tried using blockchain to enhance their efficiency. For instance, the London Stock Exchange (LSE) is considering introducing blockchain technology to traditional asset trading.

The introduction of HKEX Synapse by HKEX is a significant move towards improving the efficiency and modernity of the Asian financial markets, especially in the backdrop of China’s blanket ban on crypto. The settlement platform is also a step forward in establishing Hong Kong as a major hub for web3 technology.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash