At the forefront of change! Swiss Digital Exchange will conduct first digital distribution (IDO)

According to Coindesk's September 30 report, the Swiss Digital Exchange (SDX), a blockchain company of the Swiss Stock Exchange's SIX Group, has organized a global consortium of financial institutions that has supported its "first digital distribution (IDO)".

Screen Shot 2019-10-01 at 12.03.45 PM (Source: Coindesk )

The first digital release of the Swiss Digital Exchange will begin to raise funds in the middle of next year. It is similar to the traditional initial public offering (IPO), except that the stock will be sold in the form of a securities pass issued on the Swiss Digital Exchange platform.

Thomas Kindler, who just took over as chairman of the Swiss Digital Exchange, said that the first digital issuers included banks, buyer companies and market infrastructure providers whose goal was to legalize technology and raise funds.

Kindler tells CoinDesk:

In addition to investing in Abu Dhabi's sovereign wealth funds, we expect our clients to invest in us and help us validate the platform and make it better. The focus of the first digital distribution is not on money; it is on investment funds associated with the verification of business and business models.

Kindler declined to disclose the names of the members of the consortium. He also did not disclose how much the Swiss Digital Exchange intends to raise. He said that SIX Group will retain a majority stake in the Swiss Digital Exchange.

Kindler said:

The market is clearly interested in the form of our offering. We forecast that there will be four or five large investors and about 10 small investors in the offering.

The Swiss Digital Exchange is wholly owned by the SIX Group, a non-listed company headquartered in Zurich. The SIX Group is owned by approximately 120 domestic and foreign financial institutions, which are also major users of their services.

The SDX Securities Pass issued by the Swiss Digital Exchange is equivalent to the platform currency of its trading platform.

Kindler said:

We want to set a standard so that we can make our exchanges better, and SDX will be equivalent to native asset tokens.

In a fully regulated environment, it is complicated to pass equity in the form of unlisted stocks, as evidenced by examples from companies such as Nivaura. With the help of the London Stock Exchange Group, Nivaura has been working on this in the sandbox of the UK Financial Market Conduct Authority (FCA).

The SDX Digital Pass will be released on the blockchain and built using R3's Corda Enterprise Edition. When asked about the specific information related to the secondary market or the pass, the Kindle said that the information he can disclose at present is limited.

He says:

We are considering the first digital release in two phases. In the first stage, we first look for international investors. Then the second stage is issued.

The exchange went online until the next year

At the Sibos 2019 conference in London last week, the Swiss Digital Exchange released a press release on the prototype of the Swiss Digital Exchange, and acknowledged that the system, which was originally scheduled for the summer of 2019, was postponed until the end of 2020.

Kindler gave a comprehensive account of the current difficulties.

He told CoinDesk that "Swiss Digital Exchange is indeed end-to-end", a property that is often touted by other blockchain solutions, but in fact it only contains elements such as trading venues or key custodians.

Kindler said:

We are building a regulated central securities depository (CSD) for digital assets, which is different from holding digital assets on behalf of customers.

He said that the Swiss Digital Exchange found itself in a "difficult situation" because, on the one hand, "we are faced with time pressure from competitors and stakeholders to go public, but at the same time, we have no market, we are developing the market. ""

He also hinted that the bank, the future customer of the Swiss Digital Exchange, may not fully adapt to this new world of universalization, he said:

Simply developing the core infrastructure of the exchange is challenging because it is disrupting existing businesses.

Previously, the Swiss Digital Exchange said that its plan was to first pass on unlisted stocks, then traditional assets such as bonds; in the future, more assets, such as real estate and art, may also be certified.

However, the company's current plan is to focus first on non-traditional Certified assets. For the first time to pass the traditional bank assets into a plan, the Kindle said:

This is our idea nine months ago, but the situation has changed. Whether the traditional blue chip business is entering the digital world, I think it remains to be seen. Obviously, we foresee that this situation will exist for a long time, but banks are also looking for solutions; instead of eroding their existing businesses, they create new revenue opportunities.

Hosting puzzle

Kindler acknowledges that the main pain points that cause delays in trading are mostly in the post-trade process, especially in the areas of asset custody and central securities depository creation of blockchains.

He says:

Therefore, we turned our focus to the post-trade business. Currently, listings and transactions are not our main focus. These are all progressing normally, we just need time.

The Swiss Digital Exchange is customizing R3's Corda to create its hosting solution instead of introducing a third-party hosting provider to build it.

Kindler said that as in the entire asset lifecycle, the key is to "customize to meet our own requirements, but also integrate into our existing connections."

He added that the client should be able to connect:

Whether it is connected to the traditional world or connected to the digital world is not important.

Central bank currency

Another challenge facing the Swiss Digital Exchange is how to connect to the Swiss Real Time Settlement System (RTGS) and the central bank's currency through the Swiss National Bank (SNB).

Kindler said:

This part has yet to be added as it goes beyond the scope of traditional commercial bank fund custody solutions.

Blockchain-based digital currency allows for the immediate exchange of cash and assets, and is often seen as an important fuel based on blockchain value transfer, as in the wholesale banking sector.

Kindler said there are three ways to trade cash on the Swiss digital exchange. First, the Swiss Digital Exchange has an account in the Swiss real-time settlement system, which happens to be operated by its parent company SIX on behalf of the Swiss National Bank.

He says:

We have an account in the Swiss real-time settlement system, where we can put the central bank's money there and then generate a legal currency pass (endorsed by the central bank's funds). As a central securities depository, we can guarantee that we will not overissue the legal currency.

One way, Kindler said, is that the Swiss Digital Exchange “interacts with the existing Swiss real-time settlement system in a way that does not require a legal currency pass. We share a real-time interface with the Swiss real-time settlement system, which can be handled this way. funds."

Finally, he said that the Swiss National Bank may issue a digital version of the Swiss franc, but "it has not yet entered this stage."