| Services | Description |
|---|---|
| Origination | • Refers to the services provided to the Issuer, including market insights and advice, • Responsibility of the originator, generally an ECM (Equity Capital Markets) or DCM (Debt Capital Markets) team in association with the Issuer |
| Structuring | • Refers to the determination of the characteristics of the Security Tokens to be issued (e.g. type of instrument, underlying DLT, etc.), or modelling; • Responsibility of the Structuring Manager appointed by the Issuer |
| Placing | • Refers to the search for Investors on behalf of the Issuer; • Responsibility of the Lead Manager appointed by the Issuer |
| Issuance processing | • Refers to the execution of the issuance, including: ✓ Term sheet production; ✓ Book building (IOI collection); ✓ Allocation; ✓ Price fixing; ✓ Final terms production; ✓ Instrument creation; ✓ Book execution (IOI conversion into subscriptions); • Performed by the Registrar, on an electronic platform provided by an Issuance Facility Operator, as mandated by the Issuer. |
During the issuance phase, most of the services are performed off-chain, leveraging current services.
While the origination phase aims at increasing issuance opportunities for the Issuer, the purpose of the structuring phase is to identify the type of instrument to issue, with the relevant terms and conditions, and to design the expected features of the Security Token. The underlying DLT to be used depends on criteria fixed by the Issuer and the Structuring Manager, but also on available services (e.g. off-the-shelf or customizable Smart Contract libraries) provided by the Registrar that match those criteria.
The Issuer appoints the Registrar and the Settlement Agent (some Registrars and Settlement Agents may offer joint services, and in most cases the Registrar will also carry out the role and functions of a Settlement Agent), through an Agency Agreement.
For the placement phase, if applicable, the Issuer generally appoints a dealer as Lead Manager to search for Investors. In case of syndication, a group of underwriters is set up by the Lead Manager. The dealer and the underwriters act as executing parties for the Investors (instructing parties).
The Issuer also contracts with an Issuance Facility Operator to process the issuance by the Registrar on its Issuance Facility.
The Issuer and Registrar apply their own KYC processes to the Lead Manager (and the underwriters), which in return, applies its own KYC process to the Investors.
If the Issuance Facility Operator and the Registrar are two different legal entities, the Issuance Facility Operator and the Registrar need to have a contractual agreement:
- during the issuance processing stage, the Issuance Facility Operator submits the term sheet to the Registrar for the creation of the instrument (a Smart Contract is created and tokens are allocated to the Issuer).
- the Issuance Facility Operator also manages subscriptions, according to one of the following models:
- direct subscriptions registration model: the Issuance Facility Operator sends the settlement instructions related to the subscriptions (based on crypto SSI provided by the executing parties) directly to the Registrar. This model requires the executing parties to enter their crypto SSI on the Issuance Facility.
- indirect subscriptions registration model: the Issuance Facility Operator sends the subscriptions details to the executing parties, which in return instruct the Registrar to initiate their subscriptions on-chain by submitting corresponding settlement instructions. This model requires the Registrar and the executing parties to have a legal binding, which adds complexity to the model.
On receiving the subscription instruction, the Registrar initiates the settlement process.
It is to be noted that the Registrar and the Issuance Facility Operator can be either one single entity or two different entities, depending on the preferred Security Token project setup.