Shusong Ba: Fintech Development & Innovation in Global Exchanges

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Professor Shusong Ba, the Executive Director of the HSBC Financial Research Institute at Peking University, the Chief Fellow of Asian Financial Think Tank, the Chief China Economist of Hong Kong Exchanges, received interview from AFTT Monthly Questions and Answers, to interpret the development trend and innovation practices of global exchanges in the field of financial science and technology. Professor Shusong Ba points out that in terms of the maturity of existing technological development, blockchain technology (BT), robo-advisor and other AI technologies are deemed as having the highest possibility of being applied in the trading market.

Shusong Ba: Executive Director of the HSBC Financial Research Institute at Peking University, Chief Fellow of Asian Financial Think Tank, Chief China Economist of Hong Kong Exchanges

Currently, most part of financial science and technology is used in the banking industry, Internet finance and digital currency. Their use in the securities industry is still very cautious, let alone the implementation plans that can be made in the light of the specific securities business mode. In terms of the maturity of existing technological development, blockchain technology (BT), robo-advisor and other AI technologies are deemed as having the highest possibility of being applied in the trading market, e.g. the application of BT in the field of transaction settlement and asset remortgage business, the application of BT smart contracts in Nasdaq Linq private equity market and the application of AI technology in the fields of intelligent investment research and robo-advisor. But, in actual applications, BT applications that have gone through a complete business cycle are rarely seen. For example, BT that can be deemed as relatively mature application in the field of asset backed securitization should be the technology that has gone through complete periodic test, including the process from business initiation to appearance of default and post-default disposal. But, it is exactly the case that most of the existing applications have not gone through complete periodic testing. Trend shows that the application of financial science and technology has a broad prospect, though there are many things to do now. 

It is noteworthy that new forms of risks may take shape as the business model that has integrated financial science and technology will become more and more complicated. Therefore, the regulators need to consider adjusting the regulatory framework to better regulate and promote the financial innovations brought by financial science and technology. The main regulatory idea now in various countries (e.g. Britain, EU and the United States) is based on the principle of regulatory consistency, that whoever is engaged in the financial business of the same nature should receive the same regulation——the financial services that are provided in either a virtual or a real environment is based on the same legal framework for management to ensure fair competition and prevent regulatory arbitrage. Meanwhile, the regulatory framework will also make continuous innovations in keeping with situation development to address any loophole that may appear in financial science and technology. 

“Regulatory Sandbox” is an effective tool of testing financial science and technology. To minimize the negative impact that may be brought by the application of new technology in a controllable manner, regulators can leverage “Regulatory Sandbox” to provide a relatively loose environment for regulatory experiments to eliminate and solve the risks and problems that may be encountered in the experiments, protect the interests of customers and ensure the stable operation of the financial system before expanding the financial science and technology into a wider scope. “Sandbox” tests of different degrees have been done for the sub-project technologies of financial science and technology in some countries and regions (Britain, Singapore, Australia, the United States, Hong Kong of China, Malaysia and Switzerland). AI technology, such as Robo-Advisor and Investment & Research, is the key content used by the countries in their regulatory “Sandbox” testing. The securities regulators of some countries (e.g. South Korea) have specially designed the testing environment for the purpose. Copying the practices of other countries may be the direction of the next attempt to be made by Hong Kong market. 

Introduction of Asian Financial Think Tank

Asian Financial Think Tank (hereinafter referred to as “AFTT”) is a branch of Asian Financial Cooperation Association (hereinafter referred to as“AFCA”). AFTT is comprised of 80 Chief Economists or Research Department Directors recommended by 80 AFCA member institutions in 27 countries and regions in Asia, Europe, America, Oceania and Africa. With the philosophy of "market location, global perspective, problem orientation, in-depth observation, and smart solution", AFTT is ready to develop Weekly CE (Chief Economist) View, Monthly Questions and Answers, AFTT Annual Report Asian Financial Observation and other bilingual products.

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Source: AFTT Monthly Questions and Answers No.03（Opinions in this report stand for author's personal research view only, not for opinions of any institutions）

Editor：Wenxin Du, Weihao Zhu