Security tokens admitted to the Luxembourg Stock Exchange

On the 31 January 2022, the Luxembourg Stock Exchange (LuxSE) announced that security tokens can now be admitted on its Securities Officials List (SOL) with Société Générale marking the occasion as the first issuer of security tokens to be admitted to the LuxSE.

The admission of security tokens forms part of a broader digital agenda of the LuxSE committed to digitising and modernising capital markets and reflects the uptake of market digitalisation at EU-level using Distributed Ledger Technology (DLT), including the anticipated EU Regulation implementing the EU Pilot Regime for Market Infrastructures based on DLT expected to enter into force in 2022. For more information on the EU Pilot Regime, please consult our EU Regulatory Update for February 2022.

The security tokens will not be admitted to trading on either of LuxSE's markets, the regulated market or the Euro MTF market, they can only be listed on the SOL.

What are security tokens?

The use of DLT in the financial market was introduced into Luxembourg law with the Law of 1 March 2019, which amended and extended the scope of the Law of 1 August 2001 on the circulation of securities, allowing account holders to hold securities accounts and register securities by means of secured electronic registration mechanisms, including distributed electronic registers or databases.

Security tokens are defined by the LuxSE as “financial instruments that are issued and exist on a distributed ledger, allowing for a fully digital issuance and servicing process” that offer similar benefits to the more conventional financial instruments and have the potential to improve efficiency and transparency making transactions safer and more resilient.

For more information on the potential benefits and risks of DLT, please read our alert on the White Paper on DLT and block chain published by the Commission de Surveillance du Sector Financier (CSSF) on 21 January 2022 in which the CSSF presents its recommendations to the Luxembourg financial sector.

Scope of application

The admission of security tokens to the SOL of the LuxSE is a first step towards making DLT securities mainstream in the financial market and enhances the visibility of this new form of financial instrument and the dispersal of indicative prices and data.

Given the complex nature of these tokens, the admission of security tokens to the SOL is subject to the following criteria:

1. Tokens shall represent financial instruments priced in fiat currency and qualifying as debt financial instruments;

2. Offers shall be limited to qualified investors or issued in wholesale denominations; and

3. Issuers shall comply with the SOL Rulebook and Guidelines on the registration of DLT financial instruments onto the SOL (Registration Guidelines).

For more information on how to register, please consult the Registration Guidelines.

Next steps

The LuxSE strives to stay at the forefront of technological innovation and will adapt and expand its services according to the evolving business needs of its customers and the emergence of new technological opportunities.

For further information, please do not hesitate to reach out to the Banking, Capital Markets and Regulatory team of our Luxembourg office.

Sources:

• Luxse admits security tokens issued by Societe Generale
• LuxSE - Admitting security tokens on SOL
• CSSF - Distributed Ledger Technologies & Blockchain White Paper
• Journal Offciel - Loi du 1er mars 2019 portant modification de la loi modifiée du 1er août 2001 concernant la circulation de titres.
• EU Regulatory update - February 2022