Innovating CSDs: What Hong Kong can learn from Euroclear Cash+
Cash+ and similar offerings democratise scrip dividend arbitrage.
By Steve Halliwell
In September 2025, the Hong Kong Policy Address outlined a roadmap to strengthen financial infrastructure and solidify the city’s status as a global financial hub.
The policies target market modernisation through centralised asset management, a central counterparty regime, digital asset frameworks, and faster T+1 settlements. Yet, post-trade systems, managed by Central Securities Depositories (CSDs), represent an untapped opportunity for innovation that could further boost Hong Kong’s competitive lead.
Hong Kong stands as APAC's financial gateway, a bridge where East meets West, and the city has consistently championed progress. This was shown in March this year by a memorandum of understanding between the Hong Kong Monetary Authority's CMU OmniClear, the CSD for debt securities, and the Hong Kong Exchange to enhance post-trade infrastructure.
With a market capitalisation exceeding US$6t and over 2,600 listed companies in Hong Kong, many issuers offer scrip dividend options on corporate events and ad-hoc rights offerings. The potential for growth is significant, however, too often investors miss out on these opportunities.
According to Euroclear, a leading international CSD, for optional dividends, about 85% of investors opt for cash and miss the chance to maximise their financial benefit. This choice often stems from behavioural tendencies like status quo bias, where investors stick with familiar options even when better alternatives exist.
Procedural frictions such as complex decision-making or limited access to clear information about alternative benefits also discourage engagement. Automating these decisions removes such barriers and makes it easier for investors to access greater yields.
How Euroclear Cash+ helps investors get more from dividends
CSDs like Euroclear are rewriting the rules. Cash+, Euroclear's March 2025 pilot in Belgium, France, and the Netherlands, developed with fintech Scorpeo, offers asset owners an additional electable option on scrip dividend events to capture the optimal election.
This tool transforms scrip dividend events, those moments to choose between cash or extra shares, into automated profit opportunities. When investors face a cash-or-shares dividend choice, Cash+ uses real-time algorithms to identify the optimal election, capturing up to a reported 10% yield increase.
If shares outperform cash, a long-dated trade is carried out via an appointed broker. If cash wins, shareholders receive full entitlement.
Cash+ and similar offerings democratise scrip dividend arbitrage, previously a niche strategy for securities lending clients, making it accessible for every asset owner with fees: an ad valorem charge plus 50% on extras. Shareholders maximise returns without downside.
Why Hong Kong’s market Is ready for change and how
As Europe advances with T+1 settlement and dynamic election tools, Hong Kong could and should consider adopting a similar approach. A locally partnered Cash+ variant aligns with the long-term goals of expanding product offerings across asset classes, positioning Hong Kong as an attractive investment destination.
The favourable tax regime neutralises dividend pitfalls, and HKEX's flexible listing rules fuel a robust IPO pipeline and attract global issuers. This creates ideal conditions for Cash+ adoption. It is not just about efficiency; it diversifies revenue for HKEX's clearing arm, Hong Kong Securities Clearing Company, and turns overlooked events into competitive moats.
Building a successful business model in Hong Kong requires a focused and collaborative approach. Market operators like HKEX or CMU should actively assess, demand, and assemble key stakeholders (brokers, custodians, and investors) to uncover challenges in current processes, including manual steps and settlement delays. Early discussions with the SFC can help clarify regulatory considerations and pave the way for smoother implementation.
Innovative services like Cash+ can reshape how CSDs connect with the market, supporting Hong Kong’s policy ambitions for modernisation and deeper investor engagement.
As APAC and global markets look to stay ahead, regions like Hong Kong offer fertile ground for piloting or partnering on new solutions.
Whilst adapting these models comes with hurdles, the potential to strengthen investor ties and broaden revenue streams makes the journey worthwhile and sets the stage for the next wave of financial innovation.