HSBCĀ has issued a HK$1 billion (US$ 128m) one year digital note using DLT. It used a similar setup to the sovereign Hong KongĀ US$756 million digital bondĀ issuance earlier this year. Hence, the latest digital note was issued on theĀ HSBC OrionĀ DLT, with the local central securities depository (CSD), the CMU, as the platform operator.
It is the first digital note listed on the Hong Kong Stock Exchange (HKEX) by a Hong Kong company. It is also the first English lawĀ digital bondĀ issued in Hong Kong. The 3.6% notes used a two day settlement window.
The integration with other CMU systems means that investors who donāt directly participate in the DLT platform can still buy the notes in the conventional manner. For this issuance the bonds are accessible directly via the DLT, via custodians and via CMU accounts. The February sovereign bonds were issued under Hong Kong law and were also accessible via Euroclear and Clearstream. However, the Euroclear and Clearstream linkage to CMU is notĀ yetĀ available for the English law digital bond.
While digital bond issuances promise efficiencies, lower costs and the potential of risk reduction through delivery verus payment, liquidity can be an issue. However, this is addressed by these CSD integrations. Otherwise, if the bonds are only available via the DLT and not through the channels that investors normally use, it reduces the potential pool of investors and hence the bondās liquidity.
HSBCĀ took on quite a few roles as issuer, platform provider, arranger, dealer, sole bookrunner and joint lead manager. The other lead managers were Agricultural Bank of China (Hong Kong Branch), China Construction Bank (Asia), Bank of China, ICBC (Asia) and Bank of Communications.
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Meanwhile, HSBC Orion uses Digital Assetās DAML combined with Hyperledger Fabric.
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