Listing a Sukuk on Euro MTF FAQ

Contents

1. What are Sukuk?

Sukuk are Shariah-compliant financial instruments structured to generate returns without involving interest. Returns are derived from the performance of an underlying asset, project, or investment, or from pre-agreed profit-sharing arrangements.

Sukuk, regardless of their structure, fall under the same regulatory framework as conventional bonds, provided they have the following characteristics:

Payment of capital: The Sukuk holder transfers a specified amount to the Sukuk issuer
Identification of assets: The arrangement requires the prior identification of specific assets or an asset class that the Sukuk-issuer will acquire. These assets are intended to generate direct or indirect income or gains. Assets may include any type of property rights, irrespective of ownership by the Sukuk holder, and may be acquired either prior to or following the effective date of the arrangement
Fixed term: The transaction must include the specification of a definitive period at the conclusion of which the arrangement ceases to be effective. This duration is defined as the Sukuk Term
Structure of payments: A Sukuk issuer has two primary obligations towards the sukuk holder: (a) To repay the capital (the redemption) in full, either at the end of the Sukuk Term or incrementally over term. (b) To remit other payments (the additional payments) on one or more designated occasions during or at the end of the Sukuk Term
Payment amounts: The cumulative total of the additional payments is subject to a limitation. It must not exceed the amount that would, at the date of Sukuk issuance, constitute a reasonable commercial return relative to a conventional debt instrument.

2. What are the two main types of Sukuk?

There are two main types of Sukuk:

Asset-based Sukuk, where investors do not have legal ownership; returns are backed by the issuer’s credit
Asset-backed Sukuk, where investors hold beneficial ownership of the underlying assets transferred to an SPV

An asset-based Sukuk is linked to an underlying asset, but legal ownership remains with the issuer (originator or SPV). Returns depend on the issuer’s creditworthiness, rather than the performance of the underlying asset.

This structure is economically similar to a conventional bond. Key features include the absence of a true sale of the asset, investors bearing the issuer’s credit risk rather than the asset’s risk, and returns are typically fixed and are backed by payments from the issuer.

In case of default, investors have recourse to the originator, as in conventional bonds.

An asset-backed Sukuk involves a true sale of assets from the originator to a special purpose vehicle (SPV), which in turn issues Sukuk certificates to investors. The SPV, acting as the issuer, holds legal title to the underlying assets, while Sukuk holders gain beneficial ownership and receive returns derived from the assets’ performance.

In case of default, investors have recourse to the assets held by the SPV, not to the originator, making this structure comparable to conventional asset-backed securities (ABS).

3. What prospectus disclosure requirements apply to Sukuk listed on Euro MTF?

Sukuk, regardless of their structure, are treated as conventional bonds from a prospectus disclosure perspective. For Euro MTF disclosure, LuxSE distinguishes between asset-based Sukuk (treated as debt) and asset-backed Sukuk (treated as ABS). Underlying-asset disclosure only applies to the latter. Unless a Sukuk is also structured as an ‘asset-backed security’ (ABS), Euro MTF admission will follow the annexes applicable to non-equity debt, and LuxSE will not request underlying-asset disclosure as would apply to ABS.

For an asset-based Sukuk, where legal ownership of the underlying assets is retained by the issuer (originator or SPV, i.e. no true sale occurs), the following appendices of the LuxSE Rules & Regulations (R&R) apply:

Appendix II – Disclosure of the characteristics and terms of the Sukuk
Appendix III (if relevant) – Information on the guarantor or obligor, since investors have recourse to the originator or sponsor, not to the asset pool
Appendix V – Information on the issuer, usually an SPV; and
Appendix VI – Part 1 only, i.e. only the description of the structure of the issue

For an asset-backed Sukuk, where there is a true sale of underlying assets from the originator to the issuer (typically an SPV), the following appendices of the LuxSE Rules & Regulations (R&R) apply:

Appendix II – Disclosure of the characteristics and terms of the Sukuk (i.e. the securities themselves)
Appendix V – Information on the issuer, usually an SPV, and
Appendix VI – Detailed description of the underlying assets that have been sold to the SPV and are backing the Sukuk.

4. How is Appendix II of the R&R applied to Sukuk?

Although Appendix II of the R&R refers to interest-related items, these should, in the case of Sukuk, be read as reflecting Shariah-compliant return mechanisms (e.g., profit or rental payments), rather than conventional interest.

5. Is historical financial information of the SPV mandatory in the prospectus?

As a general rule, Appendix V of the R&R requires the inclusion of audited historical financial information for the last two financial years of the issuer.

However, where the SPV has recently been incorporated (i.e., less than one year of existence) and/or has not yet published any financial statements, LuxSE may accept a narrative disclosure of the SPV’s financial condition instead. In such cases, a clear statement confirming the absence of debt or other liabilities (if applicable) may be sufficient.

6. Is it always necessary to prepare a prospectus and have it approved by LuxSE?

A prospectus exemption may be granted by LuxSE in the following cases:

The originator of the asset-based Sukuk is a sovereign state or a corporate issuer listed on an EU-regulated market or on a third-country market deemed equivalent by LuxSE
The asset-based or asset-backed Sukuk is issued or guaranteed by a sovereign state and/or regional or local authorities.

7. What actions are required in the case of a prospectus exemption?

In such cases, issuers may apply through the FastLane listing process as outlined in Part 2, Chapter 4, Section 401 of the R&R. Instead of submitting a full prospectus, LuxSE reviews an admission document that includes, at a minimum, the terms and conditions of the Sukuk, as well as a description of the underlying assets for asset-backed Sukuk. This admission document is not subject to formal approval by LuxSE but will be published under the issuer’s security card on the LuxSE website.

8. Can a listing on LuxSE's Euro MTF Specialist Securities Segment (EM3S) be pursued?

A listing on LuxSE’s EM3S can be pursued provided that the securities are offered exclusively to professional investors. EM3S is specifically designed for professional investors and is subject to strict eligibility requirements as set out in Part 2, Chapter 4, Section 402 of the R&R. Under this segment, no prospectus approval is required, and no listing document is published. If the eligibility conditions are met, a Sukuk listing on this segment is possible.

Find out more on EM3S

9. Are there differences in the approval timeline or process for Sukuk?

The standard approval timelines and processes apply to Sukuk listings. Typically, the first round of comments is provided within a maximum of 3 business days of submission. Each subsequent updated version of the prospectus, admission document, or EM3S submission, is reviewed within a maximum of 2 business days.

The approval process typically takes between 2 and 4 weeks, depending on the complexity of the file and may be shortened to less than 2 weeks for repeat issuers.

10. How is the Know Your Customer (KYC) process handled during the Sukuk listing application?

For issuers without existing securities listed on LuxSE, the KYC process begins concurrently with the review of the draft prospectus. The issuer is required to submit comprehensive documentation enabling LuxSE to assess transparency, ownership structure, and governance. The KYC review is generally completed within one week, depending on the completeness and quality of the submitted materials.

11. Are there any specific eligibility criteria for Sukuk with regard to clearing and settlement?

As per conventional securities, in order to be listed on Euro MTF, Sukuk must be eligible for clearing and settlement through recognised international central securities depositories (ICSDs), specifically Clearstream and Euroclear. An ISIN and a common code must be obtained prior to listing.

12. Is it possible to list Sukuk under a programme?

Yes. Sukuk may be listed under a programme through the preparation of a base prospectus, in line with the relevant appendices referenced in questions 5 and 6 above, depending on their structure.

Once approved, the base prospectus is valid for 12 months from the date of approval. During this period, individual Sukuk issuances may be admitted to trading on Euro MTF.

If certain information related to the underlying assets is not available at the time of approval of the base prospectus, it may be included in the pricing supplement, provided that the necessary disclosure items were foreseen in the form of pricing supplement included in the approved base prospectus.

13. Can Sukuk be admitted on LuxSE's Securities Official List (LuxSE SOL)?

LuxSE SOL is a dedicated section of LuxSE that allows issuers to register financial instruments without admission to trading on a market. LuxSE SOL is designed for issuers looking for visibility for their securities and for whom admission to trading is not a prerequisite.

If this listing option is sufficient for the issuer, Sukuk may be admitted on LuxSE SOL. LuxSE SOL rules provide lighter requirements regarding the content of the listing document compared to securities admitted on the Euro MTF.

14. Can Sukuk be displayed on the Luxembourg Green Exchange (LGX)?

To be displayed on LGX, issuers must first list their Sukuk on one of LuxSE’s official listing venues, i.e. the Bourse de Luxembourg’s EU-regulated market, Euro MTF or LuxSE SOL.

To qualify for LGX display, issuers must declare the sustainable nature of their Sukuk issuance, specifying whether it is green, social or sustainability issuances and/or whether it is sustainability-linked.

The LGX team evaluates the Sukuk’s eligibility for display based on the listing documentation submitted during the listing process.

Additionally, a second-party opinion (SPO) is required to confirm the alignment of the issuer’s green, social or sustainability framework with recognised principles or standards, such as the ICMA Green Bond Principles or the Climate Bonds Initiative Climate Bonds Standard (CBI CBS). Issuers must also commit to ongoing post-issuance reporting.

No additional fees are charged for display on LGX.

Discover LGX

Always in motion