Banking Investment News

SIX’s digital stock exchange planning tokenized versions of Nestle and Novartis

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Swiss stock exchange SIX had initially planned to launch its blockchain-based exchange SDX in the first half of 2019. That was delayed until the second half. Now a proof of concept might happen this year, but trading will start in 2020. CEO Jos Dijsselhof outlined the reasons in an interview with NZZamSonntag. They plan to list tokenized Nestle and Novartis shares on SDX, but it requires a change in the law.

From March to June this year the Swiss Federal Council conducted a consultation about changes in legislation to accommodate digital exchanges. The plan is to create a new category of “DLT trading systems” to offer services such as trading, settlement and custody of DLT-based assets. Additionally, new legislation will govern electronic rights registration for DLT-based assets and explicitly incorporate such assets into its bankruptcy legislation.

The benefits of SDX are nearly instant settlement and the potential for fractional ownership. There’s a transparent digital register of ownership, and the ability to tokenize a variety of assets such as wine, art and property.

The SIX CEO also envisages expanding the pool of companies that raise finance on the capital markets. “In the US, 70 to 80% of companies finance themselves via the capital market, the rest claims bank loans,” said Dijsselhof. “Here in Switzerland the relationship is just the opposite. That could change.”

So far, no decision has been made on the first assets to be traded. But the platform is technically ready. SIX is in discussions with banks about what assets would be of interest. “Specifically, we discuss warrants, regulated initial digital offering – a kind of digital IPO -, real estate and mutual funds,” said Disselhof.

Because no decision has yet been made, the SDX hasn’t formally applied to market authority Finma, though there is a Memorandum of Understanding.

The race is on

The race is on around the world for fully regulated tokenized stock exchanges. MERJ which runs the regulated stock exchange in the Seychelles, listed its own tokens last week. ICE’s Bakkt is working on a digital platform which will initially issue Bitcoin futures. And SDX has some competition in its own back yard as Swisscom, Deutsche Börse and Sygnum are creating a digital platform. The Stock Exchange of Thailand also has plans to launch a platform in 2020.