On Tuesday 24 October 2023, the Luxembourg Stock Exchange (LuxSE) marked the listing of the first financial instrument issued on a distributed ledger technology (DLT) and admitted to trading in the European Union (EU).
The €100 million Digital Native Note (DNN), issued by the World Bank (International Bank for Reconstruction and Development) using Euroclear’s new Digital Securities Issuance (D-SI) service and admitted on LuxSE's EU-regulated market, marks the first time a digitally native security issued on a DLT infrastructure is admitted to trading on a market falling under the scope of the Markets in Financial Instruments Directive 2014 (MiFID II).
The D-SI service is part of Euroclear's new Digital Financial Market Infrastructure (D-FMI), a DLT-based technological component of Euroclear Bank's securities settlement system, which aims to foster the advancement of digital infrastructure throughout financial markets. LuxSE noted that it is directly connected to the legacy component of Euroclear's securities settlement system for secondary market operations, enabling investors which are not directly connected to the D-FMI to trade digitally native securities which were issued on D-FMI with a CSD in accordance with the Central Securities Depositories Regulation (CSDR).
According to LuxSE, the admission of this landmark listing, which joins the ranks of several earlier admissions leveraging DLT technology, represents a "natural step forward" for LuxSE and reflects its "continuous support" of the adoption of digitally native securities in the international bond market.
In January 2022, LuxSE broke new ground by becoming the first exchange in the EU to admit three digital securities issued by Société Générale on its Securities Official List, LuxSE SOL. This development was followed by the admission of three digital securities issued by the European Investment Bank (EIB), including the world’s first digital Climate Awareness Bond, which was admitted on LuxSE in June 2023.
LuxSE added that this listing takes place within a larger context driven by the acceleration of market digitalisation using blockchain technology and facilitated by the European Commission's Digital Finance Strategy, unveiled in September 2020.
"This new digital bond issuance and the development of Euroclear's D-FMI platform represent a firm step towards the all-important digitalisation of capital markets, which the Luxembourg Stock Exchange is actively contributing to," said Arnaud Delestienne, Director of International Capital Markets and Member of the Executive Committee at LuxSE. "We firmly believe in the transformative power of DLT to enhance international capital markets and are excited to reaffirm our commitment to our industry's digital future with the listing of the first tradable digitally native security in the EU."
The adoption of DLT is expected to significantly enhance global debt capital market operations and benefit market participants by streamlining and speeding up processes, reducing costs and fostering direct and transparent engagement between issuers and investors. In parallel, it can also help increase the security and transparency of transactions, noted LuxSE.
