The term security token offering or STO denotes an event during which security tokens are offered to investors by a company in order to raise capital.
STOs differ from initial coin offerings (ICOs) in that the security tokens offered to investors during an STO are contracts which represent underlying assets, rather than assets in themselves.
Another key difference between STOs and ICOs is that STOs are carried out within a regulatory framework and in most cases represent legally-binding contracts. Most legal jurisdictions have strict legal requirements which contracts must meet in order to be designated as securities. Depending on the jurisdiction, companies offering security tokens through STOs are either required to meet requirements applicable to securities, or aim to meet these requirements in order to appeal to investors.
The tokens offered during an ICO are simply utility tokens, the value of which is based on demand for the product or service which requires the tokens. They are not normally legally-binding contracts and do not represent underlying assets. They simply have utility value in themselves.
The Swiss Digital Exchange (under development by the SIX Swiss Exchange), provides a regulated primary marketplace on which security tokens can be offered through STOs and a secondary marketplace on which security tokens can be traded.