HKEx will start blockchain bidding

As one of the world's major exchanges, the HKEx is actively embracing the new wave of technology.

“Every day, the trading volume of Hong Kong stock market has reached 1.6 million, involving a turnover of US$13 billion. The daily turnover of global stock markets is as high as US$450 billion, far exceeding the global GDP of US$230 billion.” Lukas Petrikas, co-director of the Innovation Lab, said at the Financial Technology Forum in Hong Kong on July 11.

At the same time, Petrikas revealed that the Hong Kong Stock Exchange is studying how to use new technology to shorten the settlement cycle, such as reforming the new share issuance mechanism. Currently, an IPO is conducted in Hong Kong. It is usually about five days between the issuance price and the official listing on the Hong Kong Stock Exchange. The mechanism for the issuance of new shares T+5 (the new stock pricing date is 5 trading days away from the listing date) is also To a certain extent, it has affected the rapid response ability of new stock pricing to market changes, which has been criticized by the market.

Li Xiaojia, chief executive of the Hong Kong Stock Exchange, said in an interview with the 21st Century Business Herald that the direction of the future reform of the new share is to break the existing logic. The entire business model may change for some participants, and ultimately hope to Do T+1, which is listed on the next day after pricing, to reduce the risk of market volatility.

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Liang Songguang, Chief Technology Officer of the Hong Kong Stock Exchange, told the media on July 11 that it is necessary to discuss with different stakeholders how the current practice needs improvement. It has not yet entered the stage of discussing which technology to use, but it emphasizes that the blockchain is one of the considerations. technology.

Petrikas admits that technology can generate a lot of "fun" information, use technology to track the stock prices of companies listed on the Hong Kong Stock Exchange, and find that the main macro factors driving the change of stock prices are successful corporate ideas and effective value creation, but short-term investors. The trading behavior is mainly affected by “instant news” and “animal instinct”, which makes the stock price fluctuate.

Major exchanges embrace new technologies

With the development of blockchain technology, the advantages of high transparency, low cost and high efficiency make the major exchanges ready to move.

The three-year strategic plan announced by the Hong Kong Stock Exchange has pointed out that the future will take root in China, connect the world and embrace technology. At the end of last year, the Hong Kong Stock Exchange officially cooperated with DigitalAsset to develop a post-trade distribution and processing platform for the Shanghai-Shenzhen-Hong Kong Stock Connect to the northbound trading and blockchain-driven.

Liang Songguang said that the current Proof of concept results are satisfactory and will invite all parties to participate in the bidding. At the same time, he pointed out that the HKEx has applied artificial intelligence technology at the level of key information, market surveillance and identification of investor behavior patterns in the announcement of listed companies.

In fact, in December 2017, the Australian Stock Exchange (ASX) has announced the use of blockchains to handle stock trading, making it the first large exchange in the world to officially enable blockchain technology. It is reported that ASX plans to officially launch a blockchain network to replace the decades-old Chess electronic entry system in 2021, which will save up to $23 billion in costs.

In October 2018, the Office of the Chinese Economist and the Innovation Lab of the Hong Kong Stock Exchange published a research report, “The Application and Regulatory Framework for Financial Technology,” to explore how financial technologies such as blockchain and artificial intelligence affect the global exchange market.

The report pointed out that the blockchain has five major advantages in the securities transaction settlement process, including the use of blockchain technology to start liquidation and settlement when transactions occur, greatly reducing settlement time. Each participant achieves a high degree of consistency in the data fields on the blockchain, which facilitates the participants to quickly process the data and greatly improve the settlement efficiency.

However, Peter Shen, director of technology strategy and innovation at the Singapore Exchange, admits that the financial market is an ecosystem that includes different players such as brokers and customers. Therefore, it is difficult for exchanges to carry out technological innovations unilaterally. Action, "For example, in a transaction, brokers need to investigate the customer's background information, while other institutions provide credit lines, the whole process is very complicated. Therefore, it takes a certain amount of time to apply big data and AI technologies."

Hong Kong stocks through the South under the funds maturity exceeded expectations

Since the opening of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, mainland investors can directly invest in the Hong Kong stock market through the “Hong Kong Stock Connect”. What changes will this bring to the Hong Kong stock market, which has always been dominated by institutional investors?

Petrikas said frankly: "In the past, the outside world had some prejudice against mainland investors. For example, they think they prefer speculation. The mentality of stock trading is similar to that of gambling." The data shows that the stock exchange rate of mainland investors participating in Hong Kong Stock Connect reached 189%, while Hong Kong Local and international investors have a stock turnover rate of only 68%.

However, he believes that other data show that the maturity of mainland investors may exceed expectations. For example, mainland investors have a transaction size of $10,500, which is similar to international investors' $10,100. The former's order for each transaction involves only 1.5 orders, which is much lower than the latter's 3.6. The former median order resting time is as long as 136 seconds, while the latter is only 89 seconds.

The data shows that as of July 10, among the shares of Hong Kong stocks, the total amount of funds in the southward market was 144.729 billion shares, accounting for 5.30% of the total share capital of the underlying shares. The total stock market value was 896.436 billion, accounting for the total market capitalization of the underlying shares. The ratio is 3.16%. The overall shareholding ratio of the southward funds to the Hong Kong stocks is 5.30%, and the proportion of the 33 stocks to the south is over 20%.

According to the data of this reporter, in the past 20 trading days, the five largest stocks with the largest capital inflows in the past include China Construction Bank, Industrial and Commercial Bank, Hong Kong Stock Exchange, China Shenhua and China Pacific Insurance. At the same time, the most sold stocks in the South Bank include New City. Development Holdings, Sunac China, Wanzhou International, etc.

Source: 21st Century Business Herald

Author: Zhu Lina

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