Hong Kong’s stock exchange is looking to automate its handling of exchange-traded products in a bid to streamline trading as it plays catchup with Asian rivals.
Representatives from the Hong Kong Exchanges & Clearing Ltd. and local ETF issuers have met with external platform managers in recent weeks, according to people familiar with the matter.
Among firms pitching their services is State Street Global Markets, which operates Fund Connect ETF, a popular portal used in the US and Europe. The push to automate daily procedures, included the creation and redemption of units, is a bid to streamline work flow and efficiency, the people said.
It’s unclear whether the bourse will commit to a third-party vendor and the timetable for a potential roll-out as well as details such as the scope of services for the project are also unclear, said the people.
“HKEX is committed to elevating the competitiveness and attractiveness of our markets, working closely with all relevant stakeholders and solutions providers to constantly explore enhancements, as we further develop Hong Kong’s role as a global financial centre,” an HKEX spokesperson said in an emailed statement. The bourse will update the market of any developments as appropriate, the spokesperson said.
A Hong Kong-based media representative for State Street declined to comment.
Lagging behind in capitalization to markets such as Japan, China, Taiwan, South Korea and Australia, Hong Kong has released a number of measures to boost its ETF market. Recently, ETFs have been included in trading links with mainland China and the bourse has also waived stamp duties for market makers.
ETF trading rose 31% to HK$14.5 billion a day in the first quarter from the year-earlier period.
Even though widely traded, daily ETF operations at HKEX involve heavy manual input, including sending facsimiles and even physical delivery of documents. Global firms have pointed to these antiquated practices, alongside the suspension of trading during extreme weather, as running counter to international norms.
“By streamlining trading and removing faxes, exchanges may benefit from a more robust and modern trading platforms,” said Rebecca Sin, a senior analyst at Bloomberg Intelligence. “This may make it easier for market participants and increase trading efficiencies in the market ecosystem, replicating the success of the US.”
(Adds comment in last paragraph.)