KfW: First digital issuance via Clearstream’s D7
- Forward-looking step towards the digitalisation of issuances
- Use of new technologies increases efficiency and lowers costs
- KfW is examining further steps in the digitalisation of the issuing process
- Clearstream plans to expand D7 offering to other countries
KfW is the first issuer to have launched a digital fixed-income bond in the form of central register security based on the German Electronic Securities Act (eWpG). Together with Clearstream, the post-trade service provider of Deutsche Börse Group, KfW has thus taken a forward-looking step towards the digitalisation of securities issuance in the largest capital market segment – fixed income.
The issue was carried out by Clearstream on Deutsche Börse’s D7 digital post-trade platform. The transaction involves a bond with a volume of EUR 20 million, a term of two years and a coupon of 2.381%. Deutsche Bank acted as lead manager for this transaction, and Hengeler Mueller as legal advisor.
“Digitalisation is a central component of our KfWplus strategy adopted in April. It is therefore remarkable that KfW’s treasury and transaction management have implemented this pioneering electronic transaction via the D7 platform. As one of the world’s largest capital market issuers, innovation in the area of our refinancing is important to us in order to improve efficiency and reduce operating risks and transaction costs,” said Melanie Kehr, Member of the Executive Board of KfW Group.
“This issue makes KfW a pioneer in its market segment and sends an important signal to market participants. The transaction ran smoothly and has paved the way for further issues from other issuers of fixed-income securities,” explained Tim Armbruster, Treasurer of KfW Group.
In order to make even more effective use of the benefits of digitalisation, KfW is examining how further elements of the issuance process can be digitised. When using digital technologies, one of investors’ main concerns should always be taken into account: the liquidity of bonds.
Jens Hachmeister, Head of Issuer Services & New Digital Markets at Clearstream, says: “With the digital post-trading platform D7, we are building a new infrastructure for future-ready markets worldwide. Like this, we offer our clients a significantly quicker and scalable solution for securities issuance. Following the successful launch of our structured products offering, we are now enhancing D7 to include the digital issuance of debt securities, such as commercial papers and straight bonds. We are thrilled that KfW is joining us on this journey. The outstanding market demand shows: the time to digitise financial markets is now.”
The digital issuance of financial products via the D7 platform shortens the extensive and multi-day issuance process to just a few minutes. This saves time, manual effort and therefore processing costs. As a next step, Clearstream plans to enhance D7 with decentral capabilities and to offer it in further jurisdictions, e. g. Luxembourg, in line with the respective regulations and market interest. Like this, the central securities depository is creating a fully digital alternative to conventional securities issuance.
Last year, the German legislator passed the Electronic Securities Act, which allows for the dematerialisation of a bond’s global note. The legislation gives bearer bond issuers the option to choose between conventional paper-based and electronic issuance. For the latter, an entry in an electronic securities register replaces the creation of a physical global note by the issuer. With the D7 platform, Clearstream now offers the market the technical infrastructure for the issuance of electronic fixed-income products in line with the Electronic Securities Act.
KfW is one of the world’s leading promotional banks. With its decades of experience, KfW is committed to improving economic, social and ecological living conditions across the globe on behalf of the Federal Republic of Germany and the federal states. KfW refinances its promotional business almost entirely through the international capital markets. In 2021 KfW raised EUR 82.6 billion for this purpose.
About Deutsche Börse Group
As an international exchange organisation and innovative market infrastructure provider, Deutsche Börse Group ensures capital markets that are transparent, reliable and stable. With its wide range of products, services and technologies, the Group organises safe and efficient markets for sustainable economies. Its business areas cover the entire financial market transaction process chain. This includes the provision of indices, data and analytical solutions as well as admission, trading and clearing. Additionally, it comprises services for funds, the settlement and custody of financial instruments as well as the management of collateral and liquidity. As a technology company, the Group develops state-of-the-art IT solutions and offers IT systems all over the world.
With more than 10,000 employees, the Group has its headquarters in the financial centre of Frankfurt/Rhine-Main, as well as a strong global presence in locations such as Luxembourg, Prague, Cork, London, New York, Chicago, Hong Kong, Singapore, Beijing, Tokyo and Sydney.
As an international central securities depository (ICSD), headquartered in Luxembourg, Clearstream, which is part of Deutsche Börse Group, provides the post-trade infrastructure for the Eurobond market and services for securities from 59 domestic markets worldwide. With 16 trillion Euros in assets under custody, Clearstream is one of the world’s largest settlement and custody firms for domestic and international securities.