الثلاثاء 28 نوفمبر 2023، 28 نوفمبر 2023
The Canton of Zurich recently launched a digital bond worth CHF 100 million ($113m) through the SIX Digital Exchange (SDX) on Monday, as reported by Ledger Insights.
What sets this bond apart is its settlement process, utilizing a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB). With an 11-year term and a 1.45% coupon, this bond stands as a unique financial instrument.
Zürcher Kantonalbank, UBS, and Raiffeisen Switzerland collaborated as joint lead managers for this issuance. While Zürcher and UBS were part of the earlier CBDC pilot, Raiffeisen was not initially involved.
Confirming the specifics, a spokesperson from Zurich mentioned that the wholesale CBDC settlement is scheduled for December 1, exclusively for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC, at that juncture. Subsequently, the bond will be listed on both the SIX Digital Exchange and the primary SIX Swiss Exchange.
This pilot project stands out for two main reasons. Firstly, the SNB’s endorsement of a live wholesale CBDC over an extended period is noteworthy. Secondly, the SDX platform utilized for issuing the CBDC isn’t just a test platform; it’s the same production platform previously used by SDX for issuing tokenized Swiss francs in prior settlements.
In a parallel development, the City of Lugano issued a CHF 100 million tokenized bond via SDX in February. Investors could invest through the SDX central securities depository (CSD) or the conventional SIS CSD, facilitating broader accessibility without requiring deep familiarity with DLT. This issuance notably qualified for SNB’s repo, marking a significant milestone.
Zurich’s similar initiative, pending central bank repo approval, anticipates qualifying as HQLA Level 1. Additionally, it expects an AAA rating from S&P upon issuance.
Regarding settlement mechanisms involving two CSDs, an intriguing aspect is facilitating settlement on both SIS (T+2 settlement) and SDX (T0) despite differing timeframes. While both CSDs are integrated, the SDX CSD serves as the primary registry due to the native digital nature of the bonds.
Trades executed on either exchange cannot settle on the other. On the SIX Digital Exchange, trades settle instantly via the SDX CSD, whereas on the main SIX stock exchange, settlement occurs in two days via the SIS CSD using x-clear, the pan-European central counterparty operated by SIX. Over-the-counter trades have the flexibility to settle on either CSD.
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