HKEx's Data Play Slowly Comes Together

This year marks the midpoint of the Hong Kong Exchange and Clearing’s (HKEx) three-year strategic plan to make the exchange the “global market leader in the Asian time zone”.

The strategy focuses on three areas. The first looks to make HKEx—through Stock Connect—the main hub for international entities to invest in China. The second leg aims to lower internal barriers to allow the exchange to become more interconnected with international outlets. The final piece is all about technology and modernizing the exchange’s core trading platforms while exploring new partnerships.

Included in this tech transformation is the roll-out of its next-generation post-trade platform, the adoption of an event-driven architecture, and, more generally, instituting a “more data-oriented management culture” throughout the exchange. In particular, by creating a scalable data marketplace platform, HKEx will be better positioned to mobilize and monetize its exhaust data, it contends. 

The great killer of great plans is the unexpected. While Asia, and China specifically, has experience in dealing with pandemics, Covid-19 has proven to be a wholly-different beast to contain. During an Aug. 19 conference call to discuss its 2020 results thus far, Charles Li, chief executive of HKEx, seemed to indicate that the exchange’s long-term play would be monetizing its budding data endeavors—but that strategy is still forming.

“It’s also a strategy that is going to take time for us to bring it to the right angle—the right shape—and we are still a good distance away from articulating clearly what our role is going to be in that new universe where data becomes a new asset class,” he said.

After the call, I asked HKEx whether it could clarify its data plans and what was meant by data’s becoming a new asset class, but the exchange was not yet ready to speak on those matters.

Putting the Building Blocks in Place

In an earlier announcement expressing the exchange’s intent to buy a minority stake in TsingJiao, HKEx said it believed partnering with the data technology company will help build its future data marketplace. The company specializes in multi-party computation (MPC) technologies—a subfield of cryptography—that allows for collaborative data analysis without revealing private data during the analysis process.

How close this future is, though, we’ll only know when HKEx has a clear vision for building that data marketplace, and when it’s ready to talk about it openly. 

Every organization has different needs for data in a vast ecosystem inhabited by many, including data providers, users, owners, subjects, generators, regulators and investors. Li said HKEx’s role could be in the organization, development, and implementation of a technology platform that solves the problem of data privacy and data protection. 

“We are constantly looking at that particular role that we are very good at, which is connecting the dots and bringing everybody together, building up our alliances so we can start to build out our ecosystem in data, and that’s where we put the investment in,” he said. “Probably our role is going to be in the organization and development and the regulatory enforcement and implementation of a particular technology platform that allows us to solve one common problem in the data space, which is privacy and data protection. So it’s in that angle where we are most likely going to explore—again, this is something that is some distance away from our core business.”

Last year, HKEx also bought a 51% stake in Shenzhen-based Ronghui Tongjin—now known as BayConnect—which specializes in regulatory and exchange technologies. And on top of that, HKEx has also signed a memorandum of understanding with Ping An Insurance Company of China to explore potential areas they can collaborate in fintech, artificial intelligence, and data analytics, to support the mutual connectivity of the mainland Chinese, Hong Kong, and international markets.  

In response to a question by WatersTechnology during the exchange’s 1H results, Li said the exchange is still considering how these acquisitions and technologies will fit into its overall data strategy. As he noted previously, this is “a strategy that is going to take time” to complete.

HKEx is a massively important piece of the APAC marketplace, especially as Beijing exerts more authority over Hong Kong. The exchange can serve as a keystone for international players and mainland China to come together, but it would appear that, right now, the building blocks to reach that point have a long way to go.