UBS native digital bond launched on SIX Digital Exchange and SIX Swiss Exchange

Three-year bond will leverage new operational link between CSDs of the two exchanges.

By Richard Schwartz

UBS today issued a CHF375 million three-year native digital bond with 2.33% coupon and a maturity in 2025. The bond was issued on the DLT-based CSD of SIX Digital Exchange and can also be held conventionally at SIX SIS.

“The first example of an issuance of the dual-listed bond illustrates both the increasing attractiveness of issuing digital securities on SIX Digital Exchange as well as representing a significant step forward in the evolution of the SDX platform,” said David Newns, head SIX Digital Exchange.

He described the development, involving close cooperation with SIX Swiss Exchange and SIX SIS, as “in line with our long-term planning and SIX’s mandate to develop and operate innovative infrastructure services”.

The digital bond has the same instrument structure, legal status and rating as a traditional UBS AG senior unsecured note. With a single ISIN number, the bond is also intended to be listed and tradeable at both SIX Digital Exchange and SIX Swiss Exchange.

Through atomic settlement technology, settlement via SDX CSD is instant and automatic and does not require a central clearing counterparty. Investors will, however, have the ability to automatically settle and clear the bond on either SDX CSD directly or on SIX SIS via the operational link formally announced in early October.

At the time, David Hatton, head Digital Securities at SDX explained that the link enables digital CHF bonds natively issued on SDX CSD to be held and settled at SIX SIS. “This in turn opens future digital bond issuance to the broader CHF investor base, whilst laying the platform for a fully integrated CHF denominated digital bond market,” he noted.

“We are proud to leverage distributed ledger technology to launch the inaugural UBS digital bond. This shows our commitment to support the development of new financial market infrastructure,” said Beatriz Martin, UBS group treasurer. “UBS is committed to using technology not just as an enabler, but to making it a true differentiator for UBS.”

The digital bond will be eligible for the Swiss Bond Index (SBI) alongside all other UBS AG senior unsecured notes which are listed on SIX.

According to SIX, the dual-listed digital bond establishes a migration path for the market to move from issuing traditional securities to issuing natively digital securities on fully regulated blockchain based financial markets infrastructure.

A spokesperson for SDX added: “The trading and settlement of bonds and, at a later stage, other asset classes will be gradually transferred to DLT. SIX will enable market participants to trade and settle bonds on both SIX Swiss Exchange or SIX Digital Exchange during this transition phase, depending on their preference, thus increasing acceptance and trust among market participants.”