Singapore Exchange (SGX), with the help of HSBC Singapore and Temasek, has completed its first digital bond issuance pilot on blockchain.
SGX says its digital asset issuance, depository and servicing platform, replicated an SGD 400 million ($294.6 million) 5.5-year public bond issue and a follow-on SGD 100 million ($73.6 million) tap of the same issue by food and agri-business company Olam International.
Lee Beng Hong, Senior Managing Director, Head of Fixed Income, Currencies and Commodities (FICC), SGX, states: “Debt capital markets globally are characterised by deeply engrained legacy systems and processes which can be made faster, more accurate and efficient with this new technology. DLT [distributed ledger technology] and smart contracts are rapidly evolving technologies, and our vision is to fully digitalise the end-to-end corporate bond issuance and asset servicing process.”
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.
Yuval Rooz, Co-Founder and CEO, Digital Asset, reckons the bond market is “one of the last bastions of risk, holding on to paper and manual processes”.
The digital bond used HSBC’s on-chain payments solution for settlement in various currencies to help transfer of proceeds between the issuer, arranger and investor custodian.
According to SGX, some efficiencies observed within the pilot include timely ISIN (identifier) generation, elimination of settlement risk (for issuer, arranger and investors), and a reduction in primary issuance settlement (from five days to two days).
Back in July, investment firm Temasek and the Monetary Authority of Singapore completed the fifth and final phase of their blockchain-based prototype for multi-currency payments.