25 December 2023
Japan’s ODX prepares for the trading debut of security tokens on its START platform
After receiving regulatory approval in November, Osaka Digital Exchange (ODX) is set to revolutionize the Japanese securities market by launching the trading of digital securities on Christmas Day. The security token venue, known as START, will initially offer two digital securities for trading. This development marks a significant milestone for the Japanese market and highlights the growing interest in blockchain-based securities. ODX’s trading partner, SBI Securities, will also offer discounted fees during the first quarter, further stimulating market participation.
The Rise of Digital Securities in Japan:
In recent years, Japan has witnessed a surge in the issuance of digital securities, particularly in the real estate sector. Platforms such as Progmat and BOOSTRY’s iBet for Fin have facilitated the tokenization of real estate assets, paving the way for the emergence of digital securities in the country. Therefore, it comes as no surprise that the first securities to be traded on ODX’s START platform will be real estate-backed tokens.
Token Offerings on ODX’s START Platform:
The two digital securities available for trading at launch on the START platform are from prominent asset management firms. ICHIGO Asset Managers will issue a token with an expected value of JPY 2.925 billion ($20 million), backed by assets worth JPY 8.956 billion ($63 million). Kenedix Investment Partners, a prolific real estate token issuer, will issue a JPY 3.361 billion ($24 million) security token. Kenedix has previously relied on Progmat but will now utilize BOOSTRY’s iBet for Fin for this issuance.
Trading Mechanisms and Fees:
While traders will have the ability to place orders with brokers 365 days a year, ODX will only accept orders from its trading participants on workdays during two specific time windows. These windows are from 10:00:00 am to 11:29:59 am and from noon to 2:59:59 pm. ODX matches orders twice a day, at 11:30 am and 3 pm Japan Time. Initially, settlement will involve conventional payments instead of delivery versus payment.
To encourage trading activity, SBI Securities, the majority shareholder of ODX, will waive the buyer’s fee until March 29, 2024. Additionally, SBI Securities will reduce the seller’s fees, but only for web transactions. The normal SBI fees stand at 0.5% for buyers and 2% for sellers.
The Significance of Secondary Markets for Digital Securities:
The launch of ODX’s START platform highlights the growing need for secondary markets for digital securities. While a few startups have already established secondary markets for security tokens, such as Securitize and ADDX, ODX’s initiative represents the second major institutional effort in this area. The first was Switzerland’s SIX Digital Exchange (SDX), which began trading digital securities two years ago. The establishment of secondary markets is crucial for the long-term success and growth of blockchain-based securities. Alongside secondary markets, on-chain settlement and interoperability are other key building blocks necessary for the widespread adoption of blockchain-based securities.
Conclusion:
With its upcoming launch on Christmas Day, Osaka Digital Exchange’s START platform is set to transform the Japanese securities market by introducing digital securities trading. This milestone event signifies the growing interest in blockchain-based securities and the increasing adoption of tokenization in the real estate sector. The discounted fees offered by SBI Securities and the establishment of a secondary market for digital securities further enhance the appeal and accessibility of this new asset class. As Japan embraces the digital revolution in finance, ODX’s initiative paves the way for future advancements in the blockchain-based securities ecosystem.
