SINGAPORE (THE BUSINESS TIMES) – The Singapore Exchange (SGX), with HSBC Singapore and Temasek, has completed its first digital bond issuance for agri-food giant Olam International on SGX’s digital asset issuance, depository and servicing platform.
In a press statement on Tuesday (Sept 1), SGX said it has successfully replicated a $400 million 5.5-year public bond issue and a follow-on $100 million tap of the same issue by Olam.
SGX utilised DAML – the smart contract language created by blockchain start-up Digital Asset – to model the bond and its distributed workflows for issuance and asset servicing over the bond’s life cycle.
SGX said its 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.
It added that 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.
Some 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 five to two days) as well as the automation of coupon and redemption payments and registrar functionality.
“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,” said the Singapore bourse.
Building on this digital issuance, SGX added that it will work with issuers, arrangers, custodian banks and investors to digitalise bond issuance, depository and asset servicing to progressively grow the fixed-income ecosystem.
Mr Lee Beng Hong, SGX’s senior managing director and head of fixed income, currencies and commodities, said: “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.”
Olam managing director and group chief financial officer N. Muthukumar said: “Going digital will make the entire process more efficient and transparent for all parties – issuers like us receive our funds more speedily, investors get their bonds more quickly, while the arrangers, custodian and banks benefit from the reduced probability of error and speed.”