Singapore Exchange (SGX), in collaboration with HSBC Singapore and state-run investment company Temasek, has completed its first digital bond issuance on its digital asset issuance, depository, and servicing platform.
September 1, 2020 | AtoZ Markets – Singapore Exchange along with HSBC Singapore and Temasek, has completed its first digital bond issuance on the bourse’s digital asset issuance, depository, and servicing platform.
SGX successfully replicated S$400 million ($294.85 million), a 5.5-year public bond issue, and a follow-on $100m tap of the same issue by Olam International.
SGX first digital bond issuance uses smart contract
As Asia’s first syndicated public corporate bond, the digital bond marks another milestone in SGX’s use of digital asset technology, streamlining processes for issuers, underwriters, investors, and other players in primary issuance and asset servicing.
SGX used DAML, the smart contract language created by Digital Asset, to model the bond and its distributed workflows for issuance and asset servicing over the bond’s lifecycle. The solution uses smart contracts to capture the rights and obligations of parties involved in transactions such as arrangers, depository agents, legal counsel, and custodians.
The digital bond used HSBC’s on-chain payments solution. This allows for seamless settlement in multiple currencies to facilitate the transfer of proceeds between the issuer, arranger, and investor custodian.
Key efficiencies observed within the pilot include timely ISIN (identifier) generation, elimination of settlement risk (for issuer, arranger and investors), reduction in primary issuance settlement (from 5 days to 2 days) as well as automation of coupon and redemption payments and registrar functionality.
SGX plans to grow the fixed income ecosystem
Building on the success of the project, SGX plans to work with issuers, arrangers, custodian banks, as well as investors. The aim is to digitalize bond issuance as well as depository and asset servicing, thereby growing the fixed income ecosystem.
Lee Beng Hong, senior managing director, head of fixed income, currencies and commodities at SGX said:
“Debt capital markets globally are characterized by deeply engrained legacy systems and processes which can be made faster, more accurate and efficient with this new technology. DLT (digital ledger technology) and smart contracts are rapidly evolving technologies, and our vision is to fully digitalize the end-to-end corporate bond issuance and asset servicing process. We look forward to playing a part in strengthening the fixed income market infrastructure of Singapore, Asia’s fixed income hub for bond issuers.”
David Koh, head of global liquidity and cash management, HSBC Singapore, says:
“The digital bond issuance shows how our on-chain solution can fulfill payment needs in DLT-based ecosystems and demonstrates our desire to shape and participate in the next generation of asset networks, to better service our securities services clients.”
Neelamani Muthukumar, managing director and group chief financial officer at Olam International adds:
“Going digital will make the entire process more efficient and transparent for all parties – issuers like us receive our funds more speedily, investors get their bonds more quickly while the arrangers, custodian, and banks benefit from the reduced probability of error and speed.”
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