Thanks to blockchain technology, the Hong Kong Stock Exchange's "Shanghai-Shenzhen-Hong Kong Stock Connect" system, which connects the Hong Kong stock market to mainland China's stock market, is being upgraded. The upgraded "Southbound Trading" system, called "HKEX Synapse," will use smart contracts to help execute post-trade workflows and reduce settlement risks, according to a press release.
Hong Kong traders use the system to buy stocks in China, which can effectively speed up settlement and improve transparency, the Hong Kong Exchange said.
A technical brochure related to this explains that Synapse is able to create settlement instructions for all parties in the settlement chain simultaneously, facilitating parallel processing, while also providing near-instant status updates to all parties involved in the transaction, which is very important when connecting traders in two different markets.
In the first half of 2023, the average daily trading volume of the "Shanghai-Shenzhen-Hong Kong Stock Connect" reached US$15.302 billion (approximately 109.3 billion yuan), a year-on-year increase of 5% and a 50% increase from 2020 levels.
The Australian Financial Review reported last year that the Australian Securities Exchange has been recommended to replace its settlement system called CHESS with blockchain technology.