Digital Securities
Tokenized Stocks Face Their 24/7 Liquidity Test
Tokenization is the process of converting currencies or assets into transferable digital tokens. This can apply especially to securities like bonds and stocks, which are then traded 24/7. But tokenization can be deployed as well for payments, or for real-world assets (RWA) like real estate, commodities, carbon credits, etc. In total, tokenized RWA could become a market as large as $11T.
One of the promises of tokenization for securities is increased liquidity and constant trading, in contrast to the 5 days a week, only during working hours, trading sessions of traditional stock exchanges.
In response to this eventuality, stock exchanges are actually considering moving to a 24/7 model.
But in practice, such a move to constant trading, be it with tokenization or not, might or might not improve trading conditions. It is also entirely possible that this will just extend trading hours for thinly traded markets. Without providing meaningful liquidity.
It is to investigate this that Stefan Scharnowski, a researcher at the University of Mannheim, Germany, has published in the Journal of International Financial Markets, Institutions and Money1 under the title “Fractional and around the clock: Trading activity in tokenized financial assets”.
Securities Tokenization Spreading
A lot of progress has been made recently in deploying tokenized financial assets.
For example, Robinhood, a retail broker, recently launched tokenized US securities trading for European investors, and Nasdaq has received SEC approval for a rule change enabling exchange-based trading of tokenized securities in the United States. And even venerable institutions like the Bank of England are pushing for tokenization.
However, there is still little empirical evidence regarding how investors actually trade in tokenized financial securities, which is the topic of this study.
This is also an occasion for a better understanding of trading patterns, as blockchain technology offers a uniquely transparent view of trading, including executed trades, fractional and non-fractional, and precise transaction volumes.
Fractional trading, still a relatively new option for most investors, will also make higher-priced assets more accessible. Minimum-size trades and sub-one-share orders should be especially common on the buy side and outside the core session if these are frequently used by small retail investors.
How The Study Was Made
The tokenized assets studied in this paper were traded at FTX, which is now defunct but was, at the time, one of the largest cryptocurrency exchanges.
Unless otherwise mentioned, the sample is restricted to end in October 2022, shortly before the news spread that FTX and Alameda Research heavily depended on the FTT token for financing, eventually leading to the collapse of the exchange.
Due to regulatory concerns, US customers were not allowed to trade in the tokenized assets. The active investor base thus consisted of non-US, predominantly retail traders accessing US-listed assets through this venue.
The stocks were bought using other crypto assets or US dollars.
“Even though the market for tokenized assets at FTX has since ceased to exist, the trading environment it created remains highly relevant. FTX offered one of the most active tokenized asset platforms to date, and its structure – featuring around-the-clock access, fractional trading, and low minimum order sizes – mirrors elements now being adopted by other financial platforms.”
The collected data comprises trades in 49 tokenized assets, mostly major companies and popular stocks like Tesla, Netflix, Alibaba, Microsoft, Coinbase, Amazon, but also commodity ETFs like GDX, GDXJ, and SIL (gold and silver), and even pharmaceutical companies like Moderna and Pfizer in the aftermath of the pandemic.
What The Study Found
Tokenized Assets Follow Traditional Trading Hours
Despite around-the-clock availability, trading activity in tokenized assets is substantially concentrated during the hours when the primary listing exchange of the underlying asset is open
This suggests that demand for off-hours trading was largely limited when compared to regular-session activity.
52% of trades (66% of dollar volume) occurred during the regular trading session. The remainder was split across different periods:
- Pre-market session (15% of trades, 14% of volume).
- After-hours session (6% of trades, 3% of volume).
- When the primary market is closed (27% of trades, 17% of volume).
So, with the exception of when the market is closed, just 1/4th of all trade, this closely mirrors the activity in traditional stock exchanges.
This could reflect a relative immaturity of tokenization and tokenized stock trading. Or maybe this could prove a durable feature of these markets.
Unique Order Sizes
The token with the highest overall trading activity was the Grayscale Bitcoin Trust, an exchange-listed cryptocurrency fund, with 111,287 total trades. The S&P 500 ETF and Tesla were also among the most frequently traded tokens.
At the other end of the trading activity spectrum were the tokens of companies such as the Cronos Group or Uber, with fewer than 10 trades per day on average.
The average trade size is 20.47 shares, or USD 928.78. However, the overall median trade size and value are only 0.29 shares and USD 18.82, respectively, indicating that the distributions are highly skewed by a few large orders in a sea of very small ones.
Source: Journal of International Financial Markets, Institutions and Money
These smallest trades do not appear economically motivated. Instead, it seems as if traders have other motives when trading tiny amounts, for example, because they simply want to own a part of a company that has sentimental value.
“During the regular trading session, these small trades constitute only about 10% of all trades. They are relatively more frequent when the primary listing exchange is closed. Trades at the minimum order size are significantly more likely to be initiated by buyers than sellers.”
Overall, the trading pattern is consistent with the notion that larger, professional investors predominantly trade when the primary market is open, while retail trading activity is less dependent on exchange opening hours.
Such trades were made possible not only by fractional trading but also by the relatively low exchange fees.
It is remarkable that for both multiple full shares and fractional shares, the numbers used tend to be relatively round sizes, like 0.05, 0.1, 0.5, 2, 5, 10, etc. This likely reflects that most users were not aiming for a precise exposure or a percentage target in a portfolio, but a number more satisfying psychologically.
It is also important to remember that this dataset was at the dawn of tokenization. Only 995,000 trades in the tokens with a total value of $924M were performed, while the underlying assets had about 1.5 billion trades amounting to $27T in the same period.
So, token trading represented only 0.003% of the traded value compared to the underlying assets.
Tokenized Assets Prices & Arbitrage
As a derivative product, tokenized stocks can potentially differ in price from the underlying assets.
On average, the absolute price difference across all assets is 0.78%, which is much larger than the trading costs; on average, the tokens traded at a premium. The difference was on average smallest for the S&P 500 ETF and largest for the cryptocurrency funds and meme stocks.
The premium, despite the tokens being less liquid derivatives, might indicate that it stems from the fact that they offer features the underlying asset does not.
For example, it tokenizes stock trades around the clock, offers fractional trading, and provides access to US equity markets for investors who would otherwise face significant regulatory or cost barriers to trading there directly.
Another potential explanation is the difficulty of arbitrage away a premium for retail investors.
“Arbitrage is easier when tokens trade at a discount, since investors can then buy the token and redeem it for the higher-priced underlying asset or an equivalent cash amount with the custodian. The reverse requires the custodian or tokenization platform to issue new tokens, which is outside the control of ordinary investors. ”
Another discovery is that price differences are substantially and significantly wider during the extended trading hours. Price differences were significantly larger in absolute terms for cryptocurrency funds than for the S&P 500 ETF.
The Future Of Tokenized Stocks
This study reveals that while tokenized stocks are in some ways similar and in some ways dissimilar to stocks traded on traditional stock exchanges.
On one side, tokenized stocks are still mostly traded during traditional exchange open hours and right before or after them, reflecting the weight of the larger market on smaller, less liquid tokenized derivatives.
On the other side, trade sizes are radically different, with the bulk of orders small, below a full share, or even often the smallest possible fractional trades.
This likely reflects that at this stage, tokenized stock markets are still mostly bought for symbolic or psychological purposes rather than profit-maximizing; or maybe just to test the technology more than to use it as a primary investment method.
Still, tokenized stock seems to trade at a premium, which likely stems from the advantage they provide their users.
Considering that trading during closed hours is relatively small, this might not be the primary advantage that many promoters of tokenization imagine.
As long as tokenized markets are much smaller (by several orders of magnitude) and less liquid, it is likely that investors will prefer to trade in sync with the broader stock markets. As such, tokenization does not seem to provide significant liquidity to stock trading.
However, fractional trading, lower fees, and access to US stocks for non-American investors are likely all powerful motivators to use tokenized stocks.
So this seems to be the case that tokenization’s main purpose, at least at the moment, is not so much 24/7 trading or providing liquidity, but the advantages inherent to blockchain.
Study Referenced
1. Stefan Scharnowski. Fractional and around-the-clock: Trading activity in tokenized financial assets. Journal of International Financial Markets, Institutions and Money. Volume 110, July 2026, 102355. https://doi.org/10.1016/j.intfin.2026.102355
