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SGX, Temasek digital asset JV partners with Covalent for bonds

Last week the Singapore Exchange (SGX) and state-backed investment company Temasek unveiled a new digital asset exchange joint venture initially targeting bonds. Today they announced the platform is called Marketnode and it’s partnering with Covalent Capital, which provides bond issuance software. Together the two platforms create an end to end solution.

Singapore’s Covalent Capital has its Order Manager and Allocation System (OMAS) system for book building. It’s a cloud-based solution that doesn’t use blockchain. On the other hand, the Marketnode platform uses blockchain to tokenize the assets for listing, trading and post-trade processes.

Covalent has a close relationship with the regulator, the Monetary Authority of Singapore (MAS), from where it secured some funding.

Marketnode has its eye on the Asian market where bond issuance outside of Japan has grown 46% in the past two years to US$387 billion in the three major currencies, dollar, yen and euro. In 2020 alone, there were more than 800 issues.

While not explicitly stated today, it’s expected that Masternode will look to partner with multiple bond issuance platforms.

“Covalent is an ideal partner for us given its focus on the syndicated bond market, where there is a critical need for digitalisation to meet the needs of issuers, buy-side institutions and service providers. This is a significant step towards building an issuance-to-settlement platform that addresses all of their infrastructure needs.” said Lee Beng Hong, SGX Senior MD, Head of Fixed Income, Currencies and Commodities (FICC).

Meanwhile, numerous firms have chosen to digitize bond issuance using blockchain because of the significant frictions. 

Some are also based in Singapore. Japan’s SBI has formed a joint venture with Switzerland’s SIX for a Singapore digital asset exchange that will include digital bonds, equities and securitized loans, subject to regulatory approval.

The Labuan International Financial Exchange (LFX), a subsidiary of Bursa Malaysia is trialing a solution with Singapore solution provider Hashstacs. Singapore based BondEvalue is targeting retail investors. It partnered with Northern Trust to develop a blockchain-based bond marketplace.

Spanish bank BBVA has trialed numerous types of fixed income issuances on its platform.

Other solutions include Nomura’s BOOSTRYLedgerEdgeMonetagoBond180 and Agora.

 
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