- SBI and SMFG are creating a new digital exchange that will utilize blockchain.
- The new exchange is expected to rival the Tokyo stock exchange through service differentiation.
- This will be the first exchange in Japan to offer digital securities after the government legalized them.
Top Japanese financial firms SBI Holding and Sumitomo Mitsui Financial Group (SMFG) will once again partner to launch a new exchange in Osaka, Japan.
The new exchange will rival Tokyo Stock Exchange (TSE) and is set to launch in three distinct phases.
The first stage will be the launch of the Osaka Digital Exchange in March. Osaka Digital Exchange will be the official digital operator with SBI and SMFG owning 60% and 40% each.
The second stage will take place in 2022 with the official launch of the exchange itself. SBI already owns a 35% stake in the Osaka Dojima Commodity Exchange (ODCE). The two will allow SBI to add asset variety to Japan.
There is a theory that SBI will also enhance ODCE to digital. Along with the new venture, SBI will thus offer assets like real estate, art, commodities, and later digital securities.
The last and final stage will happen in 2023 with the addition of digital securities on the exchange. Japan officially approved digital security trading in 2020. TSE, however, has yet to add digital securities, a move that the new exchange will exploit.
Apart from offering digital securities, the new exchange will also trade for longer hours compared to TSE. The exchange will also offer a smaller tick size, thus allowing for smaller price shifts.
The entire project will use blockchain technology, making it the first exchange in Japan to do so. SBI is a big blockchain investor and will use its skill to best position the exchange.
As partners, SBI and SMFG have created a mobile financial services app. The project started in 2020 and clearly enabled them to form a strong base for their next joint venture.
The city of Osaka has been making strides toward becoming one of Japan’s largest financial hubs. The launch of the exchange, as well as the possible digitalization of the ODCE, may contribute to reaching that goal.