Singapore Exchange (SGX), working together with HSBC Singapore and Temasek, has completed its first pilot digital bond issuance on behalf of Olam International.
The digital bond, which replicated a traditional S$400 million 5.5-year public bond issue and a follow-on S$100 million tap of the same issue, demonstrated a streamlined processes for issuers, underwriters, investors and ecosystem participants across primary issuance and asset servicing, says SGX.
SGX utilised 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 smart contracts 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 platform for settlement in multiple currencies between the issuer, arranger and investor custodian.
David Koh, head of global liquidity and cash management, HSBC Singapore, says: “This first digital bond issuance for Olam International shows how our on-chain solution can fulfil 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. We look forward to bringing this technology to our clients in Singapore and beyond.”
Key efficiencies observed within the pilot include timely Isin generation, elimination of settlement risk, a reduction in primary issuance settlement rom five days to two days, as well as automation of coupon and redemption payments and registrar functionality.
“The bond market is one of the last bastions of risk, holding on to paper and manual processes,” says Yuval Rooz, co-founder and CEO, 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."