Tokenized stocks show demand for trading beyond regular market hours, but an International Monetary Fund study found that investor safeguards and liquidity have not kept pace. More than half of transactions in five major tokenized equity products across 11 venues took place outside regular U.S. stock-market hours, the IMF said in its October Global Financial Stability Report.
About 80% of trades involved less than one share, indicating that tokenized markets are being used for access at times and in quantities conventional arrangements may not accommodate. The findings put pressure on regulators to consider how securities protections apply when trading continues outside established exchange sessions.
Stocks Show Demand as price signals cross trading hours
The IMF found that tokenized stock trading is beginning to contribute to price discovery. Between 87% and 99% of overnight price movements in tokenized equities were reflected in conventional counterparts after traditional exchanges reopened.
That result suggests tokenized markets can incorporate information while conventional exchanges are closed. Traditional markets later absorb those signals, complicating assumptions about when and where prices form. An earlier look at financial reporting also examined how technology and capital markets are changing the work of financial coverage.
Yet access does not guarantee better market quality. The study found tokenized stocks had approximately 1.5 times the volatility of conventional counterparts. Liquidity was especially thin on decentralized exchanges, where investors may face wider price swings, higher execution costs and more difficulty exiting positions.
Always-on trading raises protection questions
Conventional securities markets operate during defined sessions and use trading halts, market surveillance and safeguards against extreme volatility. Tokenized securities can trade continuously across centralized and decentralized platforms, including when trading in underlying shares has been suspended.
The regulatory question therefore reaches beyond whether a token qualifies as a security under existing law. Authorities must also consider whether traditional protections work when economically linked trading occurs across venues and jurisdictions. A previous congressional payments hearing explored a related concern about different regulatory burdens for banks and fintech platforms.
The IMF distinguished tokens that confer ownership rights in underlying securities from synthetic products that provide economic exposure to prices. A token linked to a company’s shares does not necessarily carry the same voting rights, dividend entitlements or legal protections as direct ownership.
Products associated with Ondo Finance and Backed Finance’s xStocks were identified as major participants in a tokenized equity market estimated at approximately $2.3 billion. The report also pointed to fragmented liquidity across blockchain networks and trading platforms that may not readily interoperate.
Liquidity and settlement remain under review
Continuous settlement can reduce counterparty exposure, the IMF said, but it also requires financial institutions to manage liquidity obligations around the clock. Fragmented systems add another challenge because trading activity may be spread across platforms rather than connected through established intermediaries.
The report’s findings point regulators toward trading safeguards, custody arrangements, settlement systems and market-abuse surveillance across both conventional and tokenized venues. That work must account for products that trade continuously even as the underlying shares remain within conventional market structures.
Tokenized trading is extending securities activity beyond the hours and infrastructure existing protections were designed for. The IMF’s evidence that overnight tokenized price movements are later reflected in conventional equities gives regulators a specific market link to examine as they assess how those safeguards should apply.
Related reading: digital assets and banking access amid legal scrutiny of blockchain-linked financial activity.
The IMF findings on tokenized stocks frame the oversight questions facing regulators.
