GSK Stockmann advises on first true blockchain securities transaction

25. March 2019

Frank­furt a. M. — In mid-Janu­ary 2019, GSK Stock­mann advi­sed on the first secu­ri­ties issue in Germany origi­nally execu­ted as a block­chain tran­sac­tion. Commerz­bank AG, Conti­nen­tal AG and Siemens AG were invol­ved in the transaction.

Conti­nen­tal AG as issuer, Commerz­bank AG as block­chain opera­tor, e‑money issuer and arran­ger, and Siemens AG as inves­tor have for the first time in Germany sett­led a money market secu­rity between compa­nies as a block­chain tran­sac­tion in a pilot project. The euro-deno­­mi­na­­ted commer­cial papers (“DLT-ECP”) with a volume of EUR 100,000 and a matu­rity of three days were issued digi­tally under Luxem­bourg law and elec­tro­ni­cally signed, sold and settled.

This was the first time that the money side of such a tran­sac­tion was also proces­sed directly on the block­chain using e‑money. Commerz­bank AG’s rese­arch and deve­lo­p­ment unit, the Main Incu­ba­tor, has provi­ded the Corda-based block­chain plat­form for this purpose. This DLT-ECP tran­sac­tion is an important step towards the tech­ni­cal scaling of auto­ma­ted secu­ri­ties issuance.

This is the first time that a money market secu­ri­ties tran­sac­tion has been comple­tely dema­te­ria­li­zed and still sett­led in a legally binding manner. This made the tran­sac­tion much faster and more effi­ci­ent than before. This was made possi­ble, among other things, by a secu­rity fully mapped in the block­chain. The euro purchase price amount with which the money market secu­rity was acqui­red was previously conver­ted into e‑money in order to also be able to settle the payment exclu­si­vely on the block­chain. With the help of block­chain tech­no­logy, all claims could thus be mapped in a digi­tally and legally binding manner. This also enab­led imme­diate value deli­very and sett­le­ment in real time.

In order to map the trading of the secu­rity imme­dia­tely and digi­tally in a move-for-move tran­sac­tion (so-called “deli­very vs. payment”), the tenure-based e‑money was made available digi­tally via the block­chain so that compa­nies could imme­dia­tely trade secu­rity for e‑money. The docu­men­ta­tion and money exch­ange could thus be comple­ted in minu­tes instead of days — without a bank as an intermediary.

GSK Stock­mann advi­sed on this inno­va­tive tran­sac­tion on a cross-loca­­tion and cross-border basis. The tran­sac­tion was mana­ged by the Frank­furt capi­tal markets legal team led by Peter Sche­rer. The Munich office played a leading role in the e‑money legal side of the tran­sac­tion. The Luxem­bourg office of GSK Stock­mann was closely invol­ved in the crea­tion of the digi­tal secu­rity under Luxem­bourg law.

GSK Stockmann’s exper­tise in secu­ri­ties trading on the block­chain and in e‑money issues, as well as its loca­tion in Luxem­bourg, enab­led the firm to successfully advise on all legal aspects of this extre­mely inno­va­tive transaction.

Advi­sors to Commerz­bank AG, Conti­nen­tal AG and Siemens AG: GSK Stockmann
Peter Sche­rer (†, Lead), Dr. Timo Bernau, Andreas Heinz­mann, Dr. Markus Escher (all Banking and Capi­tal Markets, Finan­cial Regu­la­tory); Asso­cia­tes: Dr. Johan­nes Blassl, Vale­rio Scollo and Fran­zisca Stucken­berg (all Banking and Capi­tal Markets, Finan­cial Regulatory).

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