SGX completes pilot digital bond with HSBC, Temasek

September 1, 2020.

The Singaporean Exchange said Tuesday that it completed a pilot digital bond issuance on its digital asset platform with Singapore and state-owned investor on behalf of agribusiness company Olam International, representing the first digital syndicated public corporate bond in Asia. 

The digital bond from Olam International, which replicated a SGD 400 million ($294 million) 5.5-year public bond issue and SGD 100 million ($73.5 million) tap, demonstrated a streamlined process for “issuers, underwriters, investors and ecosystem participants across primary issuance and asset servicing,” said SGX.

HSBC provided its on-chain payments tool for settlements in several currencies between the issuer, arranger and investor custodian. The partnership between HSBC, Temasek and the exchange operator to explore digitizing fixed-income securities issuances was first introduced in November 2019. 

“This first digital bond issuance for Olam International shows how our on-chain solution can fulfill payment needs in [distributed ledger technology]-based ecosystems, and demonstrates our desire to shape and participate in the next generation of asset networks, to better service our securities services clients,” said David Koh, head of global liquidity and cash management at HSBC Singapore.

New York-based ’s “smart contract language” called DAML was used to “model the bond and its distributed workflows for issuance and asset servicing over the bond’s lifecycle.”

SGX said it intends to see wider use of smart contracts and distributed ledger technology for the bond market in Asia. 

“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 of 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,” Rooz said, adding that the company looks forward to helping SGX’s move to digitize the end-to-end bond issuance process. 

SGX said the pilot issuance saw many benefits, including “timely” International Securities Identification Number generation, the elimination of settlement risk, a sped-up process from five days to two days, as well as the automation of coupon and redemption payments. 

“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,” Lee Beng Hong, senior managing director and head of fixed income, currencies and commodities at SGX, said. 

“We look forward to playing a part in strengthening the fixed income market infrastructure of Singapore, Asia’s fixed-income hub for bond issuers,” he added. 

Separately, the Singaporean exchange also said on Tuesday that it partnered with U.K.-based cryptocurrency market data company CryptoCompare to launch crypto indexes under SGX’s iEdge Bitcoin Index and iEdge Ethereum Index. This collaboration marks SGX Index Edge’s entry into the digital currency asset class, SGX said. 

“As the world moves swiftly towards digitalization in the creation and accumulation of wealth, digital assets are increasingly being adopted by investors,” said Simon Karaban, head of index services at SGX. 

“We are excited about this collaboration with CryptoCompare to offer a suite of new indices for market participants in Asia, reinforcing our endeavor to innovate and meet market needs,” Karaban said.