SGX’s vision is to fully digitalise the end-to-end corporate bond issuance and asset servicing process, according to senior managing director Lee Beng Hong.
SGX (Singapore Exchange), in collaboration with HSBC Singapore and Temasek, has completed its first digital bond issuance for agri-business company Olam International.
The deal involved the replication of a SGD 400 million 5.5-year public bond issue and a follow-on SGD 100 million tap of the same issue by Olam.
This marks the first step towards wider use of smart contracts and distributed ledger technology (DLT) for the Asian bond market, SGX said in a statement.
“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 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. Smart contracts are used to capture the rights and obligations of parties involved in issuance and asset servicing, i.e. 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 custodian.
According to SGX, key efficiencies observed within the pilot include timely ISIN 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.
“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,” said SGX Senior Managing Director and Head of FICC, Lee Beng Hong.
“DLT 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.”