LuxSE Admits Security Tokens Issued by Societe Generale

On Monday 31 January 2022, the Luxembourg Stock Exchange (LuxSE) and French multinational investment bank Societe Generale marked the admission of the very first financial instruments registered on a public distributed ledger technology (DLT) on LuxSE’s Securities Official List (SOL).

The three series of security tokens admitted on LuxSE SOL are digital covered bonds (OFH Tokens) and structured products that have been issued and deployed by Societe Generale’s digital assets arm, Societe Generale - Forge (SG - FORGE), natively on the Ethereum and Tezos public blockchains respectively. They are characterised as financial instruments and debt securities under French law and are compliant with the CAST open-source interoperability and securitisation framework.

This admission takes place within a larger context marked by the acceleration of market digitalisation using blockchain technology, notably through the imminent adoption of the European Union (EU) Pilot Regime, which is expected to enter into force in 2022, and which will permit the processing of security tokens through market infrastructures in compatibility with applicable EU regulations within a transitional period.

According to LuxSE, native security tokens issued on DLT allow for a fully digital issuance process and lifecycle. Due to their innovative characteristics, native security tokens have the potential to significantly improve efficiency and transparency in financial markets and make transactions safer and more resilient, all the while offering benefits similar to those of financial instruments issued in a conventional way. 

LuxSE deemed this new development into the DLT sphere a natural next step in its ambitious digital agenda.

“The admission of security tokens on the Luxembourg Stock Exchange Securities Official List represents a true milestone for EU financial markets as it provides for a unique, innovative, robust and publicly accessible solution for issuers and investors of these instruments. This constitutes yet another significant step towards the digital transformation of the Luxembourg Stock Exchange and a very first building block in our contribution towards price discovery and transparency of financial instruments issued using DLT", explained Julie Becker, CEO of LuxSE. “We are delighted to welcome Societe Generale, a leading institution in the DLT space, as the first issuer of security tokens at our exchange and are confident that other issuers will follow suit as more and more market participants capitalize on this disruptive technology".

To clarify the eligibility criteria and guide issuers of security tokens through the admission process, LuxSE today published guidelines for the registration of DLT financial instruments onto SOL. To be considered for admission on LuxSE SOL, security tokens will need to respect these guidelines as well as the LuxSE SOL Rulebook. 

Societe Generale is a pioneer in the DLT space. Since April 2019, Societe Generale and its subsidiary SG - FORGE have structured several native security tokens issuances deployed on DLT for their clients, the latest being the European Investment Bank’s (EIB) €100 million digital bond issued in 2021. 

Arnaud Jacquemin, CEO of Societe Generale Luxembourg and member of the Societe Generale group Management Committee, commented: “Leveraging on the differentiating expertise of the SG - FORGE teams, our intimate knowledge of the Luxembourg capital market environment and our close relationship with LuxSE, this first-ever listing shows our institutions’ capacity to step-by-step implement a truly innovative technology, thus helping build tomorrow’s global capital market distribution approach and infrastructure”.

Given the complex nature of security tokens, in the initial phase, LuxSE’s new service will only be available to experienced issuers and applicants with a proven track record in capital markets transactions. Moreover, only financial instruments, and more specifically debt securities, can be admitted on LuxSE SOL at this stage. 

As is the case for other securities registered on LuxSE SOL, security tokens will not be admitted to trading on LuxSE’s markets. However, the registration of DLT securities on LuxSE SOL will provide enhanced visibility to security tokens and their issuers, as well as facilitating the dissemination of indicative prices and securities data on this new form of financial instruments.