Circular Secondary Markets for Security Tokens

The blockchain legislation introduces a new trading license for security tokens, somewhat more broadly called “digital assets”. The new trading license will enable organized trading of digital assets in Switzerland. This makes Switzerland interesting for trading venues of all kinds of digital assets. This “first-mover-advantage” must be used in the sense of a strong market position of Switzerland.

The specific requirements envisaged by the provisions on DLT trading platforms are less far-reaching than the requirements already in place today for multilateral and organized trading systems (as well as the requirements for central securities depositories operating a securities settlement system). Nonetheless, the new requirements that potential DLT trading platform providers must meet in order to obtain a FINMA license and must adhere to during the operation of the trading system are unlikely to be suitable for smaller providers.

Circular highlights opportunities under blockchain law
A new circular from the Swiss Blockchain Federation explains the future legal provisions for digital trading platforms and provides guidance on possible design forms. Furthermore, the circular shows in detail how smaller companies, in particular also startups, can organize trading with digitalized book-entry securities outside the scope of application of the FinfraG, i.e. it explains individual alternatives for action and their framework conditions that can be chosen to set up trading with digital assets on secondary markets.

Discussed points of the circular are:

  • Trading based on the future FinfraG authorization for digital platforms
  • Trade execution based on decentralized trading systems
  • Offers on bulletin boards
  • Governance principles to be observed
  • Use of market making to create liquidity in the market

The Circular also explains practical examples of forms of secondary trading already existing in the market in accordance with the aforementioned forms of offering.

A German summary of the Circular can be found here.
The “Circular 2020/01 Secondary Markets for Security Tokens” in English can be downloaded from this link.

Information on the Circular:

Prof. Dr. Rolf H. Weber
rolf.weber@bratschi.ch

Daniel Rutishauser
daniel.rutishauser@inacta.ch

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