HK Fintech Week 2024: How fintech is helping power capital markets

During a panel discussion at Hong Kong Fintech Week 2024 on October 29 at the Asia World-Expo, the audience heard about the important role that financial technology is playing in global capital markets.

Elizabeth Wong, director and head of fintech unit, intermediaries, at the Securities and Futures Commission, described the Hong Kong regulators efforts in tokenisation. She said: “The SFC has been placing an emphasis on the underlying process of tokenisation – the distributed ledger technology (DLT). We want to provide guidance and clarity as more traditional finance players experiment with tokenisation. We issued two circulars last year on this.”

On October 28, the SFC announced that a financial institution, and one of the Project Ensemble sandbox participant, had completed a first-of-its-kind simulation of the dealing and trading process of a tokenised money market fund (MMF) using tokenised deposits (TD) within the sandbox environment.

Wong said: “We are moving beyond proof of concept, and we are looking to commercialisation of real use cases in the capital markets. You should identify the pain points and think about if blockchain can be a solution. We need to look at the processes up until settlement for tokenisation. The underlying infrastructure is very important.’

New economy

Wilfred Yiu, deputy chief executive officer, co-chief operating officer and co-head of markets, Hong Kong Stock Exchange (HKEX), noted that several reforms since 2018 have changed the DNA of the Hong Kong market, such as Chapter 18C for biotech firms and tech firms, meaning a shift away from more traditional firms, such as oil or financial firms, over the last five or six years.  

Yiu said: “In the last couple of years, over 65% of fundraisings on the HKEX have been in the new economy. There have been more than 300 new economy companies listing here raising over HK$1 trillion ($128.7 billion), and many are also interconnected with mainland China via the Stock Connect.”

Yiu added: “The Greater Bay Area, including in Shenzhen, is offering a lot of tech expansion opportunities. Our capital markets are becoming more exciting and a very vibrant market is developing, from incubation to development phases. We need the ability to have capital formation and renewable energy is another sector.”

Explaining how technology can help enhance the development of the capital markets, Yiu said: “We are looking at the technologies that can help pain points. For example, in the shortening of our IPO cycles we launched Fini (Fast Interface for New Issuance) – a public cloud type solution. We are also looking at smart financing solutions to optimise settlement efficieincy. We have also been using artificial intelligence (AI) for the last four years. We are trying to build something across the lifecycle of trading that is fit for the future.”

Europe, entrepreneurs and exchanges 

Javier Hernani, head of securities services and member of the executive board, at SIX, said that in Europe they were creating an infrastructure to encourage entrepreneurs, although he admitted overall there is “a lot of talk but not enough action”.

Hernani said: “We want to address the finance needs of different entrepreneurs across fintech, healthcare etc. In Europe a lot remains in the hands of exchanges. We have a pre-market segment for governance framework; a scale up sector; and a third one which is the growth segment. We want to help the unicorns of the future. It takes time and is a long term. We need to create an atmosphere and the solutions for change.”

Commenting on the types of technology available to exchanges, he said that AI is currently the most important, while also recognising the potential of quantum compitong. 

He said they are using AI for settlement and the use of regulations. Hernani commented: “AI really helps us for this. The big, big challenge is post-trade, cross-border investment, proxy voting information etc. how do we make that more efficient – and we believed that fintechs and AI could help.”

Hernani continued: “Digitalisation is not helping the fragmentation of the post-trade cycle. That is a real problem that needs a better solution and a bridge to be built.”

The panel was chaired by Ryan Li, a Hong Kong-based reporter at FinanceAsia. FA is a media partner to Hong Kong Fintech Week 2024 which was attended by thousands of people across October 28 and October 29. 

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