Investment Operations

Singapore’s Orchid Bond Structure to Test New CSD Distribution Model

Global Tax Withholding and Reclamation

Asian fixed income marketplace Singapore Exchange (SGX) and Euroclear Bank (Euroclear), the Brussels-based international central securities depository (ICSD), have confirmed the launch of the Orchid bond structure in Singapore, which analysts say combine domestic bond issuance with global distribution channels.

According to a joint statement, international investors will be able to purchase bonds issued by Singapore-based issuers directly on SGX’s wholly-owned subsidiary, The Central Depository (CDP) via Euroclear, and will benefit from real-time, multi-currency delivery versus payment (DVP) settlement with any counterparty within Euroclear’s network. SGX and Euroclear will look to extend the offering beyond Singapore to other regional issuers.

Stephan Pouyat, Global Head of Capital Markets and Funds Services Euroclear, said the Orchid bond structure will widen the market’s investor base. “This launch continues the successful momentum we have seen in the Asia region over the past year for this type of tailored solution. Within our ecosystem we see continued scope for this structure laying the foundation for ESG bond issuance in foreign currencies in the near future,” Pouyat said.

Industry watchers say SGX is Asia’s most global bond listing venue, having listed over 6,600 securities by more than 1,600 issuers from 66 countries with amounts issued totalling US$2.2 trillion in 26 currencies. The addition of the Orchid bond structure allows market participants to utilise SGX as a one-stop issuance, listing and distribution platform for regional issuance.

According to Lee Beng Hong, Senior Managing Director, Head of Fixed Income, Currencies and Commodities (FICC), SGX, the new structure allows issuers to tap into SGX’s listing and depository capabilities, while at the same time giving global investors access to a fast-growing Asian bond market. “Asia is home to some of the world’s fastest growing economies and we continue to see issuers tapping into debt capital markets,” said Lee. “This offering will deepen the bond market’s liquidity pool and has the potential to significantly expand the issuers’ investor base.”

SGX and Euroclear were both supported by HSBC in its capacity as arranger, custodian bank and paying agent in the setting up of the Orchid bond structure.

“Current market infrastructure must adapt to keep pace with a highly digitised and international investor community,” said Gavin Powell, Head of Global Markets, HSBC Singapore. “Technology is the key to unlocking greater market access. We are excited by the possibilities Orchid bonds will offer issuers, who are seeking diversified funding sources and deeper liquidity pools, and for international investors hungry to pursue wider investment options. HSBC is pleased to have supported SGX and Euroclear in taking this step forward; another demonstration of collaboration enabling greater opportunities,” he added.