SDX, an end-to-end platform for digital assets from the Swiss-based exchange company SIX, has launched a prototype of its digital exchange and CSD. Future releases will offer more functionality, with a particular emphasis on asset servicing, in Q1 2020. The full launch is expected in Q4 2020.
The objective of the prototype is to showcase the future of financial markets to the community and obtain feedback as well as demonstrate that a distributed CSD – based on DLT – can be integrated with a central order-book stock exchange model to ensure fair market conditions for all.
Test-cases will showcase the potential of SDX’s riskless trading model, as well as settlement on DLT. Early-stage functionality will cover digital security token issuance as well as live trading and instant settlement. This will include the cash-leg of the transaction embracing the concept of a payment token as well as access to a distributed portal where it would be possible to monitor transactions across specific DLT member nodes.
Participants making trades will execute them via a facility resembling the existing Swiss Stock Exchange infrastructure. Similarly, the asset token issuance process on SDX makes use of the Swiss Stock Exchange’s Connexor service and its best-in-class functionality.
SDX Settlement
Unlike conventional exchanges, SDX will facilitate instant settlement that will remove counterparty risk and the need for default fund collateral at a CCP – this implies that if the buy and sell-side have the necessary cash and assets to fulfill a trade, settlement will occur instantly.
This structure is helpful for providing liquidity and credibility for the issuance and trading/settlement/custody of new digital assets. For traditional institutional trading activities, a T+2 environment utilizing existing netting and CCP functions, will be made available, although not as part of the prototype. Members hold their assets on the SDX DLT in a distributed way and have access to them with their own unique private key.
“The launch of this prototype is a major milestone in creating a credible digital infrastructure for moving our industry forward. We are now one step closer to demonstrating the viability of our vision for the financial markets of the future and, ultimately, for the way people and businesses access capital. SDX is a testament to the innovative nature of the Swiss stock exchange and the foresight of its shareholders – we are combining existing market technology with revolutionary new technologies to create the market of the future.”
– Thomas Zeeb, Chairman SDX and Member of the Executive Board at SIX
A second phase of the prototype will be released in the coming months, factoring in necessary feedback from the first phase but importantly, also adding the first elements of post-trade and asset servicing (digital custody) functionality.