OPINION: How

KfW issues first digital bond via Clearstream’s D7

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NOTICE: How

  • A step towards the digitalization of emissions
  • The use of new technologies increases efficiency and reduces costs
  • KfW examines further steps in the digitization of the issuance process
  • Clearstream plans to extend the D7 offer to other countries

KfW is the first issuer to launch a digital fixed income bond in the form of a central ledger security based on the German Electronic Securities Act (eWpG). Together with Clearstream, the post-trade service provider of the Deutsche Börse Group, KfW has thus taken a step towards the digitalization of securities issuance in the largest segment of the capital market – fixed income securities. .

The issuance was made by Clearstream on Deutsche Börse’s D7 digital post-trade platform. The transaction concerns a bond with a volume of 20 million euros, a maturity of two years and a coupon of 2.381%. Deutsche Bank acted as lead manager for this transaction and Hengeler Mueller as legal advisor.

“Digitalization is a central element of our KfWplus strategy adopted in April. It is therefore remarkable that KfW’s treasury and transaction management has implemented this pioneering electronic transaction via the D7 platform. As one of the largest capital market issuers in the world, innovation in our refinancing is important to us in order to improve efficiency and reduce operational risks and transaction costs. said Melanie Kehr, member of the KfW Group Board of Directors.

“This issue makes KfW a pioneer in its market segment and sends an important signal to market players. The transaction went smoothly and paved the way for further issuance by other fixed income issuers,” explained Tim Armbruster, KfW Group Treasurer. In order to use the advantages of digitization even more effectively, KfW is examining how other elements of the issuing process can be digitized. When using digital technologies, one of the main concerns of investors must always be taken into account: the liquidity of the bonds.

Jens Hachmeister, Head of Issuer Services and New Digital Markets at Clearstream, said: “With the D7 digital post-trade platform, we are building a new infrastructure for future-ready markets around the world. Thus, we offer our customers a significantly faster and scalable solution for issuing securities. Following the successful launch of our structured product offering, we are now enhancing D7 to include digital issuance of debt securities, such as Frankfurt, December 8, 2022 Press Release Internal Commercial Papers and Classic Bonds. We are delighted to have KfW join us on this journey. The exceptional market demand shows it: the time has come to digitize the financial markets. »

Digital issuance of financial products through the D7 platform reduces the extensive, multi-day issuance process to mere minutes. This saves time, manual effort and therefore processing costs. As a next step, Clearstream plans to enhance D7 with decentralized capabilities and offer it in other jurisdictions, for example in Luxembourg, in accordance with respective regulations and market interest. Thus, the central securities depository creates a fully digital alternative to conventional securities issuance.

Last year, the German legislator passed the Electronic Securities Act, which allows the dematerialization of the global note of a bond. The legislation gives issuers of bearer bonds the possibility of choosing between a conventional issuance on paper and an electronic issuance. For the latter, an entry in an electronic securities register replaces the creation of a physical global security by the issuer. With the D7 platform, Clearstream now offers the market the technical infrastructure for issuing electronic fixed income products in accordance with the Electronic Securities Act.

Source: Clearstream


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