SIX Digital Exchange (SDX) has formally received the green light from the FINMA to operate an exchange and central securities depository for digital assets in Switzerland. With these licenses, the SIX platform now offers the highest Swiss regulatory standards.
Specifically, FINMA has granted SIX Digital Exchange Ltd a license to operate as a central securities depository and its affiliate SDX Trading Ltd a license to operate as an exchange. This is the first time in the Swiss financial center that a license has been granted for infrastructures that enable the trading of digital securities in the form of tokens and their integrated settlement.
In 2018, the subsidiary project of the Swiss Exchange (SIX) set itself the goal of establishing a fully integrated trading, settlement and custody infrastructure for digital assets based on distributed ledger technology. This milestone has now been achieved with the approval of the two licenses, paving the way for the next stage in the development of a future ecosystem. The approval now granted will allow SDX to start operating its infrastructure for digital securities.
FINMA recognizes the potential of the technology
FINMA recognizes the innovative potential of new technologies for the financial markets. To enable serious innovation, it consistently applies the existing provisions of financial market law in a technology-neutral manner, i.e. according to the principle of "same risks, same rules". At the same time, it ensures that the protective goals of financial market legislation are preserved.
Business models for multilateral trading or securities settlement based on so-called distributed ledger technology (DLT) can be authorized in two different ways. First, in the traditional form of authorization as an exchange or central securities depository under the Financial Market Infrastructure Act (FMIA). However, this requires that the corresponding offering is only open to supervised financial institutions.
As of late, trading in digital securities can be authorized on the basis of the DLT Act. With this authorization to operate a DLT trading system, organizations are also allowed to support the trading and settlement of DLT securities. Moreover, in this case it is possible to offer the service to end customers as well, provided that the relevant additional requirements - e.g. anti-money laundering provisions and the relevant provisions of the Financial Services Act - are complied with.
Building the digital finance ecosystem
In the coming months and years, SIX Digital Exchange (SDX) will continue to invest in building the digital finance ecosystem to create a global liquidity network for digital assets. It plans to enter into collaborations with partners to accelerate the onboarding of various global and local financial players.
With the addition of banks, issuers, institutional investors and insurance companies to its international customer base, SDX members will create a global exchange network for digital assets that unleashes global liquidity based on distributed ledger technology.
Digitalization of the financial markets
The digitalization of financial markets continues to progress. Although the final form of the market has not yet been determined, this is an important milestone in providing institutional investors with a secure and robust infrastructure that meets all the core requirements of a traditional exchange and CSD infrastructure.
"In this respect, the SDX approval process has proven to be an invaluable experience for SIX and for the industry as a whole. It has been instrumental in defining our offering and strategy and building a new ecosystem that helps our customers meet the increasing commercial return requirements of their stakeholders." - Thomas Zeeb, Global Head, Exchanges & Member Executive Board SIX
SDX aims to bring the digitalization of capital markets to the traditional financial world, while continuing to work with customers, regulators and other stakeholders to shape the markets of the future.
