Switzerland’s Financial Market Supervisory Authority (FINMA) has licensed the first DLT trading facility to date.

The DLT trading facility operated by BX Digital allows DLT securities to be traded. The licence was granted on the basis of the DLT Act.

BX Digital AG, a sister company of the BX Swiss AG exchange and part of the Boerse Stuttgart Group, has been licensed by FINMA as the first DLT trading facility. Licensing is governed by the Financial Market Infrastructure Act (FinMIA) and permits the multilateral trading of DLT securities. BX Digital intends to offer settlement services downstream of trading. The offer is only aimed at supervised participants, usually banks. BX Digital does not offer custody of DLT securities.

BX Digital applied to FINMA for the operation of a small DLT trading facility, meaning that certain thresholds defined in the Ordinance to the Financial Market Supervision Act (FinMIO) may not be exceeded. This brings with it a certain degree of regulatory relief.

The DLT Act entered into force in Switzerland on 1 August 2021. The Federal Act on the Adaptation of Federal Law (Art. 73a ff. FinMIA) to Developments in Distributed Ledger Technology (DLT) created a new financial market infrastructure. This supports innovation in the financial centre and specifically in the FinTech sector, without compromising stability and security for market participants. The DLT trading facility is therefore based on a solid legal foundation and a comprehensive regulatory framework for the multilateral trading of DLT securities.

As part of the licensing process, FINMA also clarified important underlying issues and required a strategy to ensure business continuity (BCM), including with regard to the settlement infrastructure based on a public blockchain. To limit operational risks, financial market regulation requires the operator to carry out technical checks of the technology used, such as checking the source code used by smart contracts.

BX Digital’s DLT trading facility uses a public blockchain (specifically: Ethereum) for settlement. For payment processing, there is a connection to the Swiss Interbank Clearing (SIC) payment system, which is operated on behalf of the Swiss National Bank. Delivery-versus-payment processing is ensured by a smart contract entered into by BX Digital: This enables simultaneous payment from the buyer’s account in the SIC system when transferring DLT securities on the public blockchain.