IMF finds over half of tokenized US stock trading happens after Wall Street closes

According to an International Monetary Fund (IMF) analysis, over half of sampled tokenized US stock trading takes place outside of Wall Street’s standard operating hours.

The IMF’s October Global Financial Stability Report also indicated that roughly 80% of tokenized equity transactions involved less than one share. This highlights a clear retail demand for fractional investments and around-the-clock access to American securities.

At the same time, the research revealed that tokenized equities experienced realized volatility that was about 50% higher than traditional counterparts, alongside significantly weaker liquidity across fragmented trading venues.

These insights emerge as various financial institutions and exchanges ramp up efforts to integrate US equities into blockchain infrastructure, which could ultimately disrupt traditional market hours and settlement frameworks.

Tokenized stock prices reflect overnight market activity

Researchers at the IMF evaluated five of the most heavily traded tokenized US equity products from Ondo and xStocks, focusing on exposure to Nvidia, Alphabet, Tesla, the Nasdaq, and the S&P 500.

The study spanned 11 centralized and decentralized trading platforms, compiling more than 2 million five-minute price and trading-volume observations across a 365-day trading period.

As of July 31, the analyzed products accounted for roughly $345 million in market value, making up 15% of the wider $2.3 billion tokenized equity market.

The observed trading behavior demonstrated that investors actively leveraged capabilities that are normally unavailable during standard US stock-market hours.

More than 50% of the aggregate trading volume occurred outside of the regular Eastern session window from 9:30 a.m. to 4 p.m., encompassing weekends and overnight hours.

The IMF noted this activity points to strong demand from participants in different time zones, as well as those looking to react to breaking news events without having to wait for American exchanges to reopen.

Additionally, the prevalence of sub-one-share transactions signaled a heavily retail-focused market, though researchers deduced this participation via trade sizes rather than through direct identification of individual investors.

Perhaps more importantly, the study discovered that overnight tokenized stock pricing contained valuable information that was later reflected in conventional equity markets.

By leveraging centralized-exchange data, IMF analysts contrasted overnight tokenized price shifts with the performance of the underlying securities during the opening five minutes of the subsequent US trading session.

The calculated pass-through rate spanned from 87% to 99%, pointing to a robust correlation between overnight tokenized returns and later price adjustments in legacy markets.

These findings imply that tokenized platforms can price in information while traditional exchanges remain closed, though the study stops short of proving that on-chain trading directly drives those price shifts.

Instead, both market types may simply be reacting to identical developments, with conventional shares rapidly realigning the moment trading resumes.

Higher volatility threatens tokenized stocks’ expansion

While activity outside normal Wall Street hours is growing, it is accompanied by notable disparities in market quality.

The IMF observed that traditional exchanges maintained substantially better liquidity than tokenized alternatives, with centralized crypto venues outperforming decentralized exchanges.

On decentralized platforms, constrained market depth and limited market-making activity meant that even relatively small trades could spark disproportionate price fluctuations.

Realized volatility for tokenized equities hovered around 1.5 times that of standard equivalents, climbing even higher on decentralized networks.

This variance is partially due to differing trading windows, as tokenized assets trade continuously while traditional metrics target standard US hours.

Despite these gaps, tokenized prices generally mirrored their underlying assets during normal trading windows. That said, decentralized venues experienced wider and more frequent price drifts, particularly during periods of low trading volume.

Such conditions could create hurdles for scaling beyond the relatively niche market footprint currently held by tokenized equities.

The IMF estimated that public tokenized real-world assets—excluding stablecoins and repurchase agreements—hit roughly $65 billion by July, contrasted with the roughly $300 trillion found in traditional capital markets.

According to the Fund, systemic risks stay constrained at current adoption levels, but a wider shift toward continuous trading and automated settlement could speed up market stress.

For instance, automated collateral management could provoke margin calls and forced liquidations outside of regular hours, potentially compounding downward selling pressure when market liquidity is already thin.

The IMF highlighted regulatory clarity, legal certainty, reliable settlement assets, and interoperability across trading networks as key bottlenecks limiting further growth.

Uncertainties also persist regarding the ownership rights tied to tokenized securities, specifically whether holders retain direct ownership claims to the underlying shares or merely hold contractual exposure to price movements.

To mitigate these nascent risks, the IMF advocated for customized circuit breakers, trading halts, and liquidity protections built for continuous markets, alongside tighter surveillance of the ties linking traditional and tokenized finance.

Regulators must also evaluate whether current consumer safeguards can function effectively during overnight and weekend windows, when automated liquidations might unfold absent the deep liquidity typically present during standard Wall Street sessions.

?Frequently Asked Questions

01What are tokenized US stocks?

Tokenized US stocks are digital representations of traditional American equities issued on blockchain infrastructure, allowing investors to gain exposure to companies like Tesla or Nvidia through on-chain tokens.

02Why do most tokenized stock trades happen after hours?

The IMF found that over half of tokenized trading occurs outside Wall Street hours, driven by international time zones, retail demand for fractional shares, and the ability to react to news without waiting for traditional exchanges to open.

03Are tokenized stocks riskier than traditional stocks?

Yes, the study noted that tokenized equities exhibited roughly 50% higher realized volatility and weaker liquidity compared to traditional counterparts, especially on decentralized platforms.