SIX’s Digital Exchange has issued the world’s first tokenised bond in a fully regulated environment using distributed ledger technology (DLT), which settles trades instantly, freeing up liquidity.
The bond, which was joint lead managed by Credit Suisse, UBS, and Zürcher Kantonalbank, was issued in two parts. Part A, the digital or tokenised part of the bond, accounted for 100 million Swiss francs of the total issuance volume. The remaining CHF 50 million, was allocated to the traditional part of the bond (Part B).
A SIX spokesperson told The TRADE it decided to issue the bond in two parts to help local banks and investors familiarise themselves with the new DLT platform and how it works. SIX announced it was building a digital exchange using DLT back in 2018. The first prototype of the new Digital Exchange went live in 2019, but it took until September this year for the exchange to be licensed by Finma, the Swiss financial regulator.
The spokesperson said the biggest advantage of DLT versus traditional post-trade infrastructure is that trades settled instantly, instead of T+2, which creates counterparty risk for exchange operators and uses up a lot of liquidity.
“This is an innovative and historic transaction as it is the first of its kind in the world on a regulated and fully integrated digital exchange,” said Daniel Schmucki, CFO at SIX. “The transaction was supported by key Swiss market participants and has demonstrated that the investor base is convinced of the innovative power of the Swiss financial market and of the supporting role of SIX in the transformation and development of the financial centre.”
Thomas Zeeb, global head of exchanges at SIX said the first issue of a tokenised bond on the SIX Digital Exchange as well as its listing and placement in the market proves that DLT also works well in the highly regulated capital markets.
The bond offering was oversubscribed several times and attracted strong interest from a broad institutional investor base in Switzerland. The company will use the net proceeds of the bond placed for general financing purposes of SIX.
Having proved the platform works, SIX says it looks forward to future issuances on its Digital Exchange by market participants as their confidence in issuing tokenised assets grows.
In August this year, Switzerland, which is home to Crypto Valley in Zug, became one of the first countries in the world to pass the distributed ledger technology (DLT) blanket act, which selectively adapts 10 existing federal laws. The legislation improves the conditions for blockchain and DLT companies in Switzerland.
The Swiss DLT bill, which came into force on February 1, this year, also clarified the legal framework for tokenised securities.
SIX emerged as a pioneer among incumbent exchange operators in the digital asset infrastructure space when it revealed its plans for a fully integrated trading, settlement and custody infrastructure for digital assets back in 2018.
However, despite achieving a number of milestones since then, the exchange has experienced a series of leadership changes at the very top. David Newns became the exchange’s third CEO in just over 18 months when he replaced Tim Grant in August.