After receiving regulatory approval in November, Japan’s Osaka Digital Exchange (ODX) plans to start trading digital securities on Christmas Day. Its security token venue START will allow the trading of two digital securities at launch. During the first quarter, one of the trading partners SBI Securities will offer discounted fees.
SBI PTS (proprietary trading system) is the majority shareholder of ODX, which started trading conventional securities last year. Other key backers include SMBC, Nomura, Daiwa Securities and Cboe Worldwide.
To date a large proportion of Japanese security tokens have been for real estate and used the Progmat or BOOSTRY’s iBet for Fin tokenization platforms. Hence, it’s no surprise that the first securities to be traded fit that profile.
One of the tokens is from ICHIGO Asset Managers using Progmat’s platform. The issuance value of the token is expected to be JPY 2.925 billion ($20m), backed by assets of JPY 8.956 billion ($63 million). The other is a JPY 3.361 billion ($24m) security token from Kenedix Investment Partners, a prolific real estate token issuer, which has issued eight digital securities before this one. Kenedix has previously mainly relied on Progmat, but for the latest issuance it will use BOOSTRY’s iBet for Fin.
Traders may be able to place orders with brokers 365 days a year. However, ODX only accepts orders from its trading participants on work days in two time windows between 10:00:00 am to 11:29:59 am, and from noon to 2:59:59 pm. ODX matches orders twice a day at 11.30 and 3 pm Japan Time.
Initially settlement will involve conventional payments and not delivery versus payment.
SBI Securities is waving the buyer’s fee until March 29, 2024 and it’s reducing the seller’s fees, but only for web transactions. The normal SBI fees are 0.5% for buyers and 2% for sellers.
The need for digital securities secondary markets
While a few startups have secondary markets for security tokens (eg. Securitize, ADDX), this is just the second launched by major institutions. The first was Switzerland’s SIX Digital Exchange (SDX) which started trading two years ago. Providing secondary markets for digital securities is seen as one of the key building blocks to enabling blockchain-based securities to flourish. Other important building blocks are on chain settlement and interoperability.
Updated: Corrected that the discounts are offered by one of the ODX brokers, SBI Securities. While SBI Securities might accept orders 365 days a year and even in person, ODX does not. Two digital securities are available at launch.
