Key Insights:
- HKEX’s Synapse revolutionizes Stock Connect’s settlement processes using DAML.
- Synapse offers real-time settlement visibility and aligns with T+0 settlement cycles.
- Integration with DTCC simplifies international transaction alignments.
On 4 October 2023, Hong Kong Exchanges and Clearing Limited (HKEX) took the financial world by announcing Synapse’s upcoming launch. This innovative platform, scheduled to go live on 9 October, promises to herald a new era of automation and efficiency, particularly in the Stock Connect program’s settlement operations.
Delving deeper into the announcement, Synapse is positioned as a game changer in post-trade activities. Built on the back of the Digital Asset Modeling Language (DAML) – a smart contract language tailored explicitly for distributed ledger technologies – the platform brings precision and security. The robustness of DAML allows for intricate transactions that bypass the need for central oversight, carving out a new niche in the Stock Connect initiative.
Stock Connect: A Brief Overview
The Stock Connect program epitomizes the financial symbiosis between Mainland China and Hong Kong. With Synapse, HKEX is poised to elevate this initiative, underscoring its vision of fostering accessible and efficient investment avenues.
Recent revamps to the Stock Connect initiative are a testament to this, with the trading calendar being expanded by nearly ten days and the induction of over a thousand fresh Mainland Chinese equities into the Stock Connect roster.
The brilliance of Synapse lies in its revamped approach to settlements. By moving away from sequential processes, the platform grants all stakeholders instantaneous visibility during the settlement phase. This is particularly important to financial pundits, who now have access to synchronized real-time data and an elevated level of scalability.
Such features come at a timely juncture, considering the Stock Connect program reported an average daily turnover of RMB 109.3 billion in H1 2023. This represents a 5% YoY increase and a staggering 50% surge from 2020 levels.
Glenda So’s Vision for Synapse at HKEX
Glenda So, the forefront figure of Emerging Business and FIC at HKEX, shed light on the prospective benefits of Synapse. She articulated that besides the apparent streamlining of post-trade mechanisms, the platform has the potential to bolster the entire market framework.
Pitched as an optional service, Synapse aims primarily at institutional investors operating across multiple time zones. These investors will find the tool invaluable, especially when needing to be in sync with the T+0 settlement cycle of the Mainland securities market.
Adding another feather to its cap, Synapse is set to amalgamate its capabilities with The Depository Trust & Clearing Corporation (DTCC). This integration, done through DTCC’s Institutional Trade Processing service, assures an automated, centralized alignment of international deals, simplifying settlement like never before.
Mubashir Ahmed is a multifaceted market analyst with extensive knowledge of the blockchain industry. He is proficient in market analysis and blockchain technology, having had experience with numerous projects in the space. He has a deep understanding of the Cryptocurrency industry, its trends, and how to best approach investing in it.
