On 4 October 2023, Hong Kong Exchanges and Clearing Limited (HKEX) announced the imminent launch of Synapse, a groundbreaking platform set to debut on 9 October. Synapse aims to bring a new level of automation and efficiency to settlement activities within the Stock Connect program.

According to HKEX’s press release, Synapse leverages DAML smart contracts to standardize and simplify post-trade activities. DAML, or Digital Asset Modeling Language, is a smart contract language designed for distributed ledger technologies. It offers precision and security, allowing for complex and reliable transactions without the need for a central authority. This technological edge makes Synapse the latest innovation in the Stock Connect program, a financial bridge between Mainland China and Hong Kong.

HKEX continues to refine the Stock Connect initiative, making it more accessible and efficient for investors. Recent enhancements include an extension of the annual trading calendar by up to 10 days and the addition of over a thousand new Mainland Chinese stocks to the Stock Connect list.

Synapse eliminates the need for sequential processes, offering immediate visibility into the settlement phase for all market participants. This is a significant advantage for financial professionals, as it provides real-time data synchronization and scalability. This is particularly noteworthy given that Stock Connect’s average daily turnover reached RMB 109.3 billion in the first half of 2023, a 5% increase year-over-year and a 50% uptick from 2020 levels.

Glenda So, who leads Emerging Business and FIC at HKEX, expressed optimism about Synapse’s potential impact. She stressed that the platform is expected to not only streamline post-trade operations but also fortify the overall market ecosystem.

Synapse will be offered as an elective service, targeting institutional investors who need to manage post-trade activities across different time zones. This is particularly crucial for those who must align with the Mainland securities market’s T+0 settlement cycle.

To further enhance the settlement process, Synapse will integrate with The Depository Trust & Clearing Corporation (DTCC) through its Institutional Trade Processing service. This will facilitate automated, centralized matching of international transactions, simplifying the entire settlement workflow.

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