More than half of all trading activity in tokenized U.S. stocks now takes place outside of Wall Street’s traditional operating hours, according to the International Monetary Fund (IMF).
IMF examines market behavior and participants
The finding was published in the IMF’s latest Global Financial Stability Report under the chapter “Scaling Tokenization: New Efficiencies, New Vulnerabilities.” This report estimates the tokenized equity market at $2.3 billion as of July 31, representing a small proportion of the roughly $65 billion in publicly tokenized real-world assets, not including repurchase agreements.
To analyze tokenized equity markets, IMF staff studied five of the most liquid stock tokens offered by Ondo Finance and Backed Finance’s xStocks, tracking the S&P 500, Nasdaq, Tesla, Google, and Nvidia. The analysis covered 11 trading venues over 365 days, representing about $345 million, or 15% of the market. Ondo and Backed together account for more than 70% of the tokenized equity sector, with products largely targeting investors outside the United States. For example, Ondo recently expanded its tokenized stock platform to the BNB Chain, focusing on user bases in Asia and Latin America.
Around 80% of the trades in this study involved fractional purchases of less than a single share, which the IMF interpreted as evidence that retail investors form the core of the market. The report emphasized that 24-hour access is a significant draw, especially for investors in distant time zones.
The IMF noted that round-the-clock trading in tokenized equities is “not merely a technical feature but a source of demand” with a pronounced appeal for participants outside New York’s business hours.
Volatility, liquidity, and price discovery
Price information from tokenized stocks over nontraditional hours also appears to influence conventional markets. Within five minutes of the U.S. opening bell, over 87% of the overnight price move in tokenized stocks was reflected in their underlying equities, according to the IMF.
The report found that realized volatility on tokenized venues is about 1.5 times higher than in traditional stocks. Liquidity remains weakest on decentralized exchanges, with centralized platforms performing somewhat better. However, pricing on the most active venues still closely mirrors the underlying shares.
The IMF suggested that the tokenized equity market is currently less liquid, more volatile, and more fragmented than its traditional counterpart, largely due to the small market size. The fund advised cautious interpretation of its findings given these early-stage dynamics.
Risks, safeguards, and policy considerations
At this time, the IMF considers systemic risks stemming from tokenized equity trading to be limited. Nonetheless, the institution recommended that policymakers design circuit breakers and liquidity safeguards for these new trading environments. Regulators were also encouraged to apply the principle of “same activity, same risk, same regulatory outcome” for overseeing tokenized markets.
The central issue, according to the IMF, is whether tokenized infrastructures, legal frameworks, liquidity supports, and risk controls are sufficient if broader adoption of tokenization were to occur.
As these new trading dynamics unfold, technical details such as liquidity patterns and timing remain crucial for market participants. In the meme token sector, for example, sudden internet trends can quickly generate millions of dollars in trading volume. Fomo App reported a trade where $99 invested in the token “Niu Lai” turned into approximately $370,000, underscoring the importance of monitoring investor choices, timing, and token selection. The platform combines social feeds, investor rankings, and trade notifications to help users track both tokens and trading activity in real time, illustrating the rapidly evolving nature of crypto markets.
