Today the Hong Kong Exchanges and Clearing (HKEX) announced plans to automate the creation and redemption of some exchange traded products (ETPs) in 2025. The new web based platform will use distributed ledger technology and smart contracts and is subject to regulatory approval.
The aim is to boost efficiency and encourage more secondary market activity.
“Speed and efficiency are critical in an increasingly dynamic market environment,” said Jean-Francois Mesnard-Sense. “HKEX is pleased to introduce this new digital enhancement. It will not only streamline operations for our market participants, but also drive more liquidity in the product ecosystem, supporting the vibrancy of our ETP marketplace and strengthening Hong Kong’s role as an international financial centre.”
While HKEX did not use the term real time, in theory an automated platform could support this. Given stock exchanges are not retail facing, it’s usually market makers that would trigger the creation and redemption process.
HKEX didn’t disclose the technology used, and hasn’t responded to our query by publication time. However, HKEX’s previous DLT activity for its HKEX Synapse settlement platform launched in 2023 uses Digital Asset’s DAML and Canton.
ETPs in Hong Kong are growing at a rate of 29 percent a year since 2020. Average daily turnover this year has been HK$17.9 billion (US$2.3 billion).
In Europe Deutsche Börse, which also uses DAML technology, developed its D7 issuance platform. It also automates workflow and has proven popular for structured products with tens of thousands of issuances per month.
