The recently launched Osaka Digital Exchange Co. (ODX) is set to introduce Japan’s first digital securities trading, introducing security tokens backed by real estate giants Ichigo Inc. and Kenedix Inc. On November 16, 2023, ODX got approval from Japan’s Financial Agency to launch the Security Token Proprietary Trading System (ST PTS).
Launch of ODX in response to increasing demand and securities offering
According to a recent report by Bloomberg, this move responds to the increasing demand from individuals for alternative assets with potentially higher returns. Tokyo-based Ichigo is scheduled to release approximately ¥3 billion ($20.1 million) in securities backed by property investments, with trading slated to begin on December 25, as reported in a filing to authorities on Monday.
ODX was founded by SBI and launched last year (2022), and also last week it announced a funding round including new investors Cboe and market makers Virtu and Optiver. Other existing backers are SMBC, Nomura, and Daiwa.
Additionally, Cboe, with its ATS license and crypto activities, could be a potential fifth pillar, given SBI’s involvement in crypto through B2C2 and a stake in Cboe Digital. SBI is active in crypto with a crypto exchange, Bitcoin mining, and an NFT marketplace.
Digital securities trading and market trends
Security tokens managed digitally, aim to enhance liquidity and simplify investment for individual traders. Despite the relatively modest size of Ichigo’s sale, it indicates a testing phase to gauge demand for unconventional securities. This initiative aligns with Japan’s strategy to sell riskier assets, offering greater rewards to support funding for an aging population.
As of the end of last year, Japanese households held over 2,000 trillion yen ($13 trillion) in financial assets, with more than half in low-interest deposits, according to Bank of Japan data.
The move into digital securities trading reflects a broader global trend, with other Asian markets like Hong Kong and South Korea also easing restrictions to facilitate security token sales. The upcoming launch of Osaka Digital Exchange marks a milestone in Japan’s head into the digital securities landscape, opening up new opportunities for investors seeking diverse and potentially higher-yielding assets.