- SGX’s digital asset issuance, depository and servicing platform was used to launch and settle in parallel, the first digital bond issuance for Olam International
- This marks the first step towards wider use of smart contracts and distributed ledger technology (DLT) for the Asian bond market
Singapore Exchange (SGX), working together with HSBC Singapore and Temasek, has completed its first digital bond issuance on SGX’s digital asset issuance, depository and servicing platform, successfully replicating a S$400 million ($294.1mn) 5.5-year public bond issue and a follow-on S$100 million tap of the same issue by Olam International, a food and agri-business company.
An Asia first for a syndicated public corporate bond, this digital bond marks another milestone in SGX’s use of digital asset technology, by streamlining processes for issuers, underwriters, investors and ecosystem participants across 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.
SGX’s solution uses smart contracts to capture the rights and obligations of parties involved in issuance and asset servicing, such as arrangers, depository agents, legal counsel and custodians. The digital bond used HSBC’s on-chain payments solution which allows for seamless settlement in multiple currencies to facilitate transfer of proceeds between the issuer, arranger and investor custodians.
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. Building on this digital issuance, SGX will work with issuers, arrangers, custodian banks and investors to digitalise bond issuance, depository and asset servicing, progressively growing the fixed income ecosystem.
Lee Beng Hong, senior managing director and head of Fixed Income, Currencies and Commodities (FICC) at SGX, said in a statement: “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 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.”
“The bond market is one of the last bastions of risk, holding on to paper and manual processes,” said Yuval Rooz, co-founder and CEO at Digital Asset. “Despite the growth in electronic bond trading, there are still many aspects that require manual intervention. SGX’s DAML smart contract solution solves a major pain point market participants have been working to fix for years.”