SDX introduces admission to trading for bonds already listed on other exchanges

Silvan Thoma
Director, Legal FS Regulatory & Compliance Services, PwC Switzerland

Since 29 September 2023, participants to SIX group's digital exchange (SIX Trading AG, "SDX") can apply for the admission to trading of bonds already listed on either SIX Swiss Exchange ("SIX") or non-Swiss exchanges recognised by the regulatory board. Once admitted to trading, bonds will be settled in the "atomic trading and settlement" process. This process employs blockchain technology to settle trades virtually in real-time, thereby eliminating counterparty risk.

Requirements for the admission to trading of bonds on SDX

SDX imposes only a few requirements for the admission to trading of a bond. First, the bond must be listed either on SIX or a non-Swiss exchange recognised by the regulatory board. If listed on a recognised non-Swiss exchange, the bonds must not be denominated in CHF. This requirement ensures that the issuer and the bond have already passed a listing procedure at an exchange, which justifies that the SDX rules do not impose detailed requirements for the admission to trading. Second, the bond must be denominated and capitalised in a way that makes it possible to expect a proper market on SDX. Notably, SDX does not set any minimum capitalisation or free-float requirements but leaves it up to the regulatory board to decide at its discretion whether a proper market may be expected. Third, the settlement of the bond must be possible through SIX Digital Exchange AG ("SDX-CSD").

In contrast to the listing of a bond, the involvement of the bond's issuer is not required for the admission to trading. Instead, SDX and participants to SDX will initiate the process by filing a declaration of interest with the regulatory board, which decides whether a bond will be admitted to trading. Once admitted to trading, the bond must not be delisted on the primary exchange, otherwise the admission to trading will be cancelled.

Settlement of trades on SDX-CSD

SDX-CSD is a central securities depository deploying blockchain technology. Participants of SDX trade cash and bonds in the form of tokens and settle both legs of the trade on SDX-CSD in the "atomic trading and settlement" process. In this process, orders placed on SDX are matched under the condition precedent that both the bond leg and the cash leg of the trade are settled on SDX-CSD. Before confirming a trade, SDX verifies with SDX-CSD whether the participants have sufficient cash and bonds to cover the trade. If so, SDX-CSD settles both legs of the trade simultaneously and thereby the condition precedent is met. This process is designed to eliminate counterparty risks and to render central clearing obsolete.

        Our services
For Swiss and non-Swiss securities firms: Advising on the admission process for new participants to SDX
For issuers of bonds already listed on an exchange: Support in the admission to trading process of bonds on SDX via a trading participant
For bond traders: Advising on the design and implementation of securities transaction reporting solutions and insider trading/market manipulation prevention frameworks