Capital markets News

Digital asset exchange SDX signs sixth bank. To list tokenized foreign bonds

sdx SIX digital exchange

Today the SIX Digital Exchange (SDX) announced the sixth banking member of its central securities depositary (CSD), Hypothekarbank Lenzburg. SDX holds Swiss licenses as a digital asset exchange and DLT-based CSD. Additionally, from Friday it will allow bonds listed on foreign trading platforms or the main SIX exchange to be tokenized and traded on SDX.

Hypothekarbank Lenzburg joins SDX

The Swiss bank wants the ability to both issue native digital securities on SDX as well as tokenize existing assets.

“The SDX membership marks a significant step in advancing our bank’s presence in digital assets,” said Marianne Wildi, CEO of Hypothekarbank Lenzburg. “Beyond token issuance and custody, our offering should include the possibility of listing digital value rights on a trusted trading venue. SDX’s ecosystem aligns seamlessly with our goals, and we eagerly anticipate this cooperation.”

Meanwhile, SDX is also participating in one of the first real wholesale central bank digital currency (CBDC) pilots. The Swiss National Bank will allow SDX to use a wholesale CBDC for a limited period. Until now, it has used tokenized money held at the central bank.

SDX to list tokenized non-native bonds

Recently law firm Lenz & Staehelin noted a change in the SDX listing rules. It will be possible to tokenize existing bonds normally traded on foreign markets or the main SIX exchange.

The key benefit that SDX offers is atomic settlement, in which the title to the bond and the money exchange simultaneously. Lenz & Staehelin highlighted another benefit – foreign currency bonds would not usually be centrally cleared when traded on SIX, but if tokenized via SDX, they can be.

It appears that the tokenization is not at the behest of the issuer. Instead, an SDX CSD member can request the tokenization or SDX can initiate the process itself.

On several occasions, SDX has launched innovative solutions to ease frictions involved in tokenization. We recently explored this in an in-depth interview with SDX’s CEO David Newns. 

The best example is the linkage between the conventional SIX SIS CSD and the SDX CSD. This allowed UBS to issue a CHF 375 million digitally native bond. Investors who were not blockchain savvy could nonetheless invest via the conventional CSD.

Meanwhile, the full set of SDX CSD members is Berner Kantonalbank, CM-Equity, Credit Suisse, Hypothekarbank Lenzburg, Kaiser Partner Privatbank, SIX SIS, UBS and Zürcher Kantonalbank.

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