Secondary Markets for Security Tokens

Co-author of the Swiss Blockchain Federation Circular. Published in October 2021.

The Swiss Blockchain Federation circular on Secondary Markets for Security Tokens analyses the prerequisites and challenges associated with trading tokenized securities on secondary markets. While the tokenization of shares, bonds, and other financial instruments is increasingly becoming feasible, the creation of functioning and liquid trading markets for these digital securities represents the crucial next step.

The document outlines the legal, regulatory, and infrastructural requirements for such markets within the Swiss financial system. In particular, it addresses questions related to market organization, trading platforms, custody, settlement, as well as compliance with regulatory requirements such as KYC/AML and investor protection. A central aspect is the integration of new DLT-based trading mechanisms into existing financial market structures.

Furthermore, the circular highlights the roles that various market participants can play within a digital securities ecosystem, including issuers, trading venues, custodians, and intermediaries. Its objective is to establish a framework that enables innovation while ensuring legal certainty and market integrity.

Overall, the document emphasizes the importance of efficient secondary markets for the success of tokenized securities, as tradable markets are essential for creating liquidity, enabling price discovery, and attracting a broader investor base.

The full document in English can be accessed here:https://blockchainfederation.ch/wp-content/uploads/2024/07/SBF-2020-01_Secondary_Markets_for_Digital_Securities_2021-10-12.pdf