HKEX working with ASX on blockchain

Hong Kong’s stock exchange is working with its Australian counterpart to share information on blockchain, as global exchanges accelerate plans for the technology in an attempt to compete and cut costs.

Charles Li, chief executive of Hong Kong Exchanges and Clearing, told the FT on Tuesday that the venue is “developing a much closer dialogue to understand what they’re doing, and sharing information…for sharing vendor relationships.”

Speaking at the Credit Suisse Asian Investment Conference, Mr Li said the exchange is looking to use blockchain, the technology that underpins bitcoin, in areas such as stock borrowing and lending, and for a number of trades that are transacted over-the-counter.

He said HKEX is seeking to implement blockchain “where nobody wants to spend the money to do anything, but where the exchange can come out and say let’s use this cheap technology to do something that doesn’t affect the central order book.”

He added that the “huge driver” prompting exchanges globally to consider blockchain is the pressure to cut costs.

Blockchain, also called distributed ledger, is an electronic record of transactions which is continuously updated and verified in “blocks” of records. The ledger is shared on computer servers, guarded by cryptography.

The Australian Securities Exchange became one of the first trading venues globally to commit to blockchain when it said at the end of last year that it would use the technology to clear and settle equities.

ASX is working with Digital Asset Holdings, the company run by former JP Morgan Chase executive Blythe Masters, which has designed the software.

Mr Li said that although HKEX started to build a blockchain-based private market for smaller firms to obtain financing two years ago, developments have been impacted by the state of software vendors in the sector.

“Unfortunately this space changes so much that the vendors we chose… eventually evolved such that they’re not really useful to us, and we’re not interested in doing it ourselves.”