Security tokens are financial instruments that are issued and exist on a distributed ledger, allowing for a fully digital issuance and servicing process. Financial instruments issued as security tokens offer investors similar investment characteristics to financial instruments issued in a more conventional way.
DLT issuances of financial instruments are expected to make transactions safer and more resilient and have the potential to significantly improve efficiency and transparency in capital markets, especially as a growing number of market participants turn to this technology.
Financial instruments issued using DLT therefore represent an important step towards the digitisation and modernisation of financial markets and contribute to creating a more open and accessible financial system.
At LuxSE, we offer issuers the possibility to register their securities on our official list, without admission to trading. These securities are included on our official list, in the SOL section, and are governed by LuxSE’s dedicated Rulebook reflecting the Grand-Ducal Regulation of 30 May 2018 which implements the Directive 2001/34/CE1 establishing the existence of the official list.
1Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities, as amended.
The display of security tokens on SOL will not only provide enhanced visibility to issuers of DLT financial instruments and to the security tokens themselves, but investors will also benefit from the dissemination of indicative prices and the guaranteed access to the Information Notice (IN) regarding these financial instruments.
As is typically the case for other financial instruments admitted on SOL, security tokens will not be admitted to trading on LuxSE. It is therefore not possible to trade DLT instruments on the regulated Bourse de Luxembourg market (BdL) or on the Euro MTF.
The most important aspect to bear in mind is that only security tokens that are debt financial instruments can be admitted on SOL. Securities must be priced in fiat currency and offers must be limited to qualified investors and/or issued in wholesale denominations. Moreover, all security tokens need to respect the SOL Rulebook as well as the Guidelines for the registration of DLT Financial Instruments onto SOL to be eligible. Given the complex nature of DLT, only experienced issuers or applicants with a proven track record can avail of this new service.
Security tokens are financial instruments which are directly issued and exist on a distributed ledger, while tokenisation is a method that converts existing rights to an asset into a digital token. The latter is effectively a means to represent ownership of assets on DLT. Debt instruments issued in the conventional way can be tokenised and moved to a distributed ledger at a later stage. Both types of debt financial instruments can be admitted on SOL subject to the above requirements.
DLT and the way this technology can be used to issue security tokens is still very much unknown to the public, and there is still a lot of confusion between cryptocurrencies and other usages of DLT technology such as the issuance of security tokens.
The energy consumption related to cryptocurrencies has been and continues to be the subject of much controversy, but while certain blockchains are indeed extremely energy-consuming, others are much more energy-efficient. Energy consumption related to an asset issued on a DLT depends on many different factors.
LuxSE verifies the presence of this information in the IN. The issuer can decide under which section of the IN the information related will be included. Disclosure items under the Guidelines can furthermore be incorporated by reference, appended to the IN or integrated (e.g. summary, risk factors section, new dedicated section or elsewhere).
About the Luxembourg Stock Exchange
The Luxembourg Stock Exchange (LuxSE) is the gateway to access international investors. With more than 39,000 listed securities, including 35,000 debt instruments, from 2,000 issuers in 100 countries, LuxSE is the world’s leading exchange for the listing of international debt securities and offers a unique and integrated service offering covering listing, trading and information services.