Overview
Stock Connect has opened Mainland China's equity markets to international investors like never before - and as more of them trade through it, the volume and complexity of post-trade activity has grown with it.
To keep pace, participants have built their own tailored solutions. While these solutions address individual participants' needs, these divergent designs have introduced additional layers of operational, processing and counterparty risk across the ecosystem. The challenge is clear: how do we make post-trade simpler for everyone at once?
Together with The Depository Trust & Clearing Corporation (DTCC), Hong Kong Exchanges and Clearing Limited (HKEX) is launching HKEX Synapse, a new integrated settlement platform, that complements the existing post-trade infrastructure for Northbound Stock Connect.
Synapse standardises and streamlines workflows, connecting participants more closely and helping the whole market move faster, more transparently and more securely.
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| Stock Connect Challenges | |
|---|---|
| Bespoke processes within tight settlement window | Stock Connect is a T+0 market, but is integrated into the established settlement flow designed for a T+2 market. Various bespoke solutions have been introduced to address market needs. |
|
Operational risk |
Multiple bespoke solutions, many with manual processes, increase the processing burden and operational risks. |
|
Complexity due to low transparency |
Participants have no real-time visibility into the settlement status, reducing the time they have to resolve exceptions. |
|
Scalability |
Lack of standard processes and manual workflow mean scalability is an issue; further index inclusion increases risks and may limit access. |
|
Barrier to participation |
Participants may be discouraged from participating in the Stock Connect market due to the additional risks and costs arising from bespoke solutions. |
The Solution: Synapse
Synapse is an optional service for Northbound Stock Connect that gives every participant one shared, authoritative view of the settlement instruction workflow. It enriches trades with Standing Settlement Instructions from DTCC's central matching solution, CTM®.
Synapse then sends settlement instructions to everyone in the chain at the same time, so parties can process in parallel – giving Stock Connect participants greater efficiency, clearer visibility and a better-connected post-trade workflow.
With the introduction of Synapse, the trading flows between CCEP and the Stock Exchange of Hong Kong (SEHK) and the matching, clearing and settlement schedules within CCASS of Hong Kong Securities Clearing Company (HKSCC) remain unchanged.
And if you do not subscribe to Synapse, nothing changes – your clearing and settlement processes stay exactly as they are.
| Synapse - Value Propositions | |
|---|---|
| Leverage existing connectivity |
Using APIs for flexible connectivity to Synapse (ISO20022) allows for efficient integration. |
|
Standardises settlement initiation flow |
Synapse introduces a standardised settlement initiation workflow, which reduces operational risk, while improving scalability. |
|
Improves transparency |
Synapse provides instantaneous status updates, allowing for faster processing and improved exception management. |
|
Encourages Stock Connect adoption |
Standardising workflows and reducing the risks and costs associated with bespoke solutions will alleviate compliance burdens and encourage new entrants to the Stock Connect market. |
|
Leverages new technology and latest SWIFT standards |
Using APIs for flexible connectivity to Synapse (adhering to ISO20022 standards) allows for efficient integration, while also moving the market into the future. |
Synapse high level workflow
Application of Synapse Service
Technical Documents
Please contact Hotline Team via email (clg@hkex.com.hk) to request access to the technical documents* below:
Rules Amendments
Contact Us
Hotline Team (clg@hkex.com.hk) / Tel: +852 2979 7123
DTCC (askdtccasia@dtcc.com)
