Legislative steps open for innovation opportunities in the technology around trading, with new digital tokenisation methods and a new category of trading facilities seeing the light of day.
An article in the International Financial Law Review sums up how the new Swiss legislation regarding DLT (distributed ledger technology) could propel a transformation of the digital derivatives market. Notably, it introduces a new category of negotiable securities put in place to facilitate the tokenisation of rights and obligations, and regulates a new form of licensed trading platform for DLT-based products. The article is written by experts Stefan Kramer and Sandrine Chabbey of Swiss law firm Homburger.
The Swiss legislative update has introduced a type of negotiable securities constructed to allow electronic registration of rights, similarly to traditional securities in terms of functionality and protection. The issuance and transfer of these new securities can occur in real time on the blockchain or other DLT-based registers. Now anchored in the law, this gives the possibility to issue rights, such as company shares, as tokens whose ownership and transfer directly affect those of the underlying rights. The new legislation is designed with some flexibility for the future development of DLT, making room for new innovative business models but is focused on representing rights and obligations. Cryptocurrencies which do not represent underlying claims would not qualify.
The new legislation also paves way for a new type of regulated platform – DLT trading facilities focused on dealing with the DLT-based products, such as the ones mentioned above including cryptocurrencies and alternative assets.
Previously this year, Taurus SA obtained a license as securities firm, allowing them to launch TDX, a multilateral trading facility for digital assets. Berner Kantonalbank recently announced the launching of their own platform.
As we recently noted, SIX Digital Exchange AG was granted the first license to operate a central securities depository for DLT securities in early September and its affiliate SDX Trading AG was approved as the first stock exchange for digital tokens.