IMF’s Tokenized-Equity Study: Trading Demand and the Conditions for Settlement

SG Group’s view: distinguish information markets from delivery mechanisms

When assessing the value of equity-linked tokens, the first distinction is between a market that turns information into prices and a mechanism that delivers holdings in another form. An active trading screen lets participants price their expectations for corporate earnings and interest rates. Whether they can trade sufficient quantities at those prices, move the proceeds where they need them and exchange holdings with another market depends on many additional conditions. Treating progress in the first function as completion of the second obscures both new demand and remaining costs.

The International Monetary Fund (IMF) released tokenization research on October 8.[1] Connecting the study’s observed trading with market design puts the economic focus on who accommodates orders when conventional markets are thin and how that burden is distributed. The division of responsibilities between users and intermediaries matters more than the name of a new technology.

The analysis has three parts. First, examine which price reveals which information earlier when the same economic exposure trades in different markets. Next, identify the time, eligibility, assets and payment instruments needed for trades that close price gaps. Finally, distinguish mechanisms that make exchange safer from mechanisms that economize on funding. This sequence makes it possible to locate the stage at which an improvement occurs, rather than jumping from technology adoption counts to economic benefits.

Ask whose burden has fallen

Smaller orders and longer operating hours can expand the ways users participate. Intermediaries, meanwhile, may take on the matching of small orders or the management of overnight inventory. User convenience can coexist with intermediary costs, so convenience alone cannot determine the efficiency of the service as a whole. Even when explicit fees look low, costs may move into bid–ask spreads, idle funds, currency conversion or the time required to withdraw assets.

SG Group focuses on how tokenization changes the funds and uncertainty involved in achieving the same economic objective, as well as whether it increases trading. Someone seeking to lock in an overnight price and someone needing dependable cash on the following business day may value the same product differently. Distinguishing the purpose of demand helps avoid both overstating adoption and dismissing the entire market simply because it differs from established arrangements.

What the IMF study observes

Calendar endpoints are unspecified.[2] It therefore cannot be assumed to cover the periods before and after a particular policy announcement or to represent all products currently available. Defining the scope narrowly is the starting point for applying the findings elsewhere.

These layers matter. The underlying identifies the economic value being tracked; the issuer is responsible for the contractual and backing arrangements that establish the product. The trading venue is where orders meet. A different issuer can mean a different party against which a holder has a claim, even for the same underlying. A different venue can mean different participants and quoting methods for the same token. Combining all three layers into a single product count makes it impossible to explain where price gaps arise.

Fix the unit of comparison first

Market comparisons should distinguish between holding the underlying constant while varying the issuer, and holding both constant while varying only the trading venue. The former helps examine rights and redemption; the latter helps examine order concentration and fees. Comparing different shares across different venues at the same time mixes company-specific price movements with market-structure effects. A large number of statistical observations does not automatically eliminate that mixture.

The period in which trading was observed also need not coincide with a period in which everyone could participate on identical terms. New products, account-opening requirements and the entry of liquidity providers can change the market’s composition. Continuing comparisons should separate a series tracking the same combinations from a broader series that adds new products. That separates the deepening of existing markets from the expansion of the observed universe.

Small trades and funding depth are different measures

Over half of volume occurred outside regular U.S. hours, the IMF reports.[3] This is evidence that venues offering longer hours are being used. Whether those orders moved from conventional markets or represent additional demand that previously could not trade is a separate question. After-hours activity alone cannot establish how much capital conventional exchanges have lost.

Smaller transactions require the same care. Splitting one order into several transactions increases the trade count without changing invested funds. Repeated trading by one person increases the count without adding users. A price increase raises turnover value even when the quantity traded is unchanged. Before describing adoption, decide whether the measure concerns the breadth of users, trading frequency, quantity or money changing hands.

A market with many small orders can offer more than a miniature version of a large-order market. Lowering the minimum investment size matters to people allocating spare funds gradually or seeking a small exposure to a particular price movement. Yet fixed transfer or account-management costs become larger relative to the investment as orders get smaller. Testing the benefits of fractional participation requires comparing the total cost of maintaining a given holding and eventually retrieving the funds, as well as the cost per order.

Do not translate trade-count growth directly into earnings

For providers, rising transaction counts and improving profitability are different outcomes. Arrangements that divide executions into smaller pieces may increase reconciliation work or customer inquiries. Aggregating orders for execution in an external market could lower unit costs, but raises a new question: who bears price movements in the meantime? Additional processing capacity and the assumption of economic risk need to be identified as separate costs.

Assessing broader participation requires combining evidence on repeat users, concentration in a few automated strategies and whether holdings remain after trading. These are additional observations needed to connect the findings to business durability, rather than conditions that invalidate the research. Evaluating the breadth of small-scale participation separately from the capacity to absorb a large order when needed avoids forcing one number to explain both a market’s strengths and its weaknesses.

A common underlying asset does not produce a single price

It is natural to expect similar prices for two products linked to the same company’s earnings. What brings them together, however, is the ability to sell one and buy the other. If few participants can execute that trade, or moving funds takes time, a gap can persist. A persistent gap alone does not establish a broken market, and a small gap does not establish identical rights.

To interpret that relationship, separate the components added to or deducted from the underlying price. The treatment of future dividends, claims on the issuer, custody arrangements, order conditions at a venue and settlement currency can all change the price participants require at the same moment. Treating every price difference as a forecast for the underlying confuses product-specific conditions with views about the company.

For example, information about a company released while its underlying-share market is closed can move prices first in an open market. That movement simultaneously reflects expectations for the future underlying price and the current imbalance between buyers and sellers. Even if the underlying moves in the same direction the following morning, the entire previous night’s token price need not have accurately represented company value. The task is to identify which components persist and which disappear.

Select the price used as a reference

Comparing the latest displayed prices may simply compare stale executions. What matters is the price at which the same quantity could actually be bought or sold at the same time. Distinguish bids from offers and test whether a gap remains after fees and currency conversion. The basic reading is explained in quoted prices, order books and execution prices.

More participants do not automatically make that comparison unnecessary. When they depend on the same custodian or funding provider, the number of independent trading capabilities may not rise as much as the apparent headcount. Quotes that are normally competitive could thin simultaneously when a common constraint binds. Assessing price convergence therefore also requires examining the independence of the participants maintaining it.

Did overnight prices move the following morning’s market?

Suppose overnight token prices and the following morning’s underlying prices move similarly. There are at least two explanations. Overnight trading may have aggregated new information into a price that morning participants then referenced. Alternatively, participants in both markets may have read the same news and independently reached similar valuations. Co-movement alone cannot determine which channel dominates.

The first market to move need not always be better informed. During hours when only the open market is observable, it appears to lead because the comparison market is stationary. Conversely, the meeting of more orders in a large morning market could correct a skewed overnight assessment. Chronological order, informational accuracy and the strength of trading’s influence are distinct properties.

Designing comparisons to examine causation

A stronger test would align news-release times and compare several venues for the same underlying. Episodes in which only one market becomes temporarily unavailable, or participation rules change, might reveal more about the mechanism than a simple correlation. Yet an outage or rule change can itself generate uncertainty and move prices. Treating either as a clean external experiment requires careful justification.

Another necessary distinction separates correct prediction from profitable execution. Even when the subsequent price direction confirms a forecast, wide spreads or transfer costs at the time may have prevented an executable trade. A small available quantity also prevents applying the price change to a large sum of money. Recognizing useful price information is different from generalizing a profit opportunity.

Evaluate useful information within its limits

Companies and financial institutions may use overnight prices to prepare for the next business day. Early evidence of order imbalances could inform staffing or collateral arrangements. Whether to translate that price change directly into accounts or risk limits as an established change in company value is a separate decision. Revaluing an entire large portfolio on the strength of one thinly traded execution can transmit a small market’s movement too widely.

The relevant counterevidence is whether overnight changes repeatedly disappear the following morning or instead contain stable information after costs. Separating underlyings, time periods, calm days and stressed days helps identify where that information is useful and where it is unsuitable. Neither unconditional trust in all overnight prices nor the dismissal of all of them as noise is necessary.

Arbitrage can be blocked outside the price gap

Arbitrage uses price differences between related products. Closing a gap in practice requires a way to sell the expensive side as well as buy the cheaper one. Unless both can be executed at the same time, the participant bears the risk that the gap reverses in between. A visible price difference and an entirely realizable spread are therefore very different things.

Comparing a token with its underlying shares requires at least three overlapping conditions: access to both markets, availability of the assets to sell and funds to pay, and the ability to restore the intended form of holdings after the trades. If one is missing, the participant takes on exposure to only one side. Allowing room for that risk in the quoted price is not necessarily irrational.

Conversely, satisfying these conditions can help narrow gaps even between geographically distant markets. The authority, procedures and time required to move assets and funds matter more than distance itself. Expanding the number of venues and connecting existing ones may both promote adoption, but have different economic effects. The former can attract new orders; the latter can reduce the fragmentation of orders that already exist.

How much can the same participant complete?

A firm able to redeem directly with the issuer does not face the same conditions as an ordinary holder who can only sell in a secondary market. Even if the former closes a gap, the latter depends on the price of that service. A market can still be convenient for ordinary holders without direct exchange rights if competing intermediaries support cash access. In that case, the focus shifts from direct rights to the competition and continuity of intermediation.

When examining dependencies, separate custody, transfers and withdrawals from the exchange’s display. The exchange, custody and withdrawal checklist helps identify those boundaries. Tracking where waiting time moves, without calling an improvement in one stage an improvement in every stage, helps explain why a price gap persists.

Ownership rights determine the exit

A January 28 statement by staff of three U.S. Securities and Exchange Commission divisions distinguishes issuer-sponsored tokenization from third-party products, and different rights in custodial and synthetic third-party arrangements. It is not a Commission rule creating new legal obligations.[4] This distinction helps separate two questions about a product displaying a company’s name: has the buyer become that company’s shareholder, or acquired a payment claim against another issuer?

xStocks’ official explanation describes its products as backed tracker certificates representing debt claims, distinct from direct share ownership and voting rights.[5] Backing assets should not be equated with shareholder status. A statement that assets provide backing does not replace examining the contract to establish against whom, and on what terms, a holder can demand performance.

Rights while holding and rights after conversion

Rights during ownership also need to be distinguished from those obtained after conversion into another asset through a prescribed process. A certificate holder may not be a direct shareholder but may have an available route to receive underlying shares after meeting conditions. Conversely, a product tracking a share price could contractually offer only a cash exit. Similar day-to-day price movements make this difference particularly easy to overlook.

The distinction means different things to someone seeking participation in corporate governance and someone seeking short-term price exposure. The former needs standing to vote or exercise shareholder rights; the latter is more immediately concerned with trading and cash access. Even the latter cannot ignore how a claim on the issuer will be fulfilled. Omitting rights that are unnecessary for a particular purpose does not mean the required payment can also be uncertain.

Translate contracts into price comparisons

When comparing products with the same reference exposure, set out how returns are received, rights exercised, assets delivered and claims pursued if the issuer encounters trouble. Recognizing those differences before comparing prices helps distinguish apparent cheapness from compensation for different terms. The foundations are explained in stock ownership and shareholder rights.

This does not mean the product with the most rights is always best. Maintaining additional rights can involve costs, and a design serving small-scale demand by omitting unnecessary functions may be reasonable. The essential task is to identify the promise being purchased before comparing prices, and determine whether it fits the intended purpose.

Some products can be redeemed at weekends

The generalization that issuer redemption must stop whenever the underlying market closes is incorrect. Ondo’s current official FAQ lists 24/7 issuance and redemption for six products—SPYon, QQQon, CRCLon, NVDAon, TSLAon and GOOGLon—alongside its usual 24/5 service. Direct access requires eligibility and onboarding, and suspension exceptions apply. Redemption pays cash value in stablecoins; the page distinguishes this from rights to hold or receive underlying shares.[6]

xStocks also has several routes. Market Flow describes a 24/5 route for onboarded direct clients that sells underlying shares and returns stablecoins.[7] Separately, xPort describes returning underlying shares to a brokerage account, subject to issuer and Alpaca identity checks and other requirements, including a registered wallet. The core operating-hours condition is 24/5.[8] These are officially described designs, not guarantees of eligibility for every holder or of individual processing outcomes.

Identify who extends the service hours

The lesson is to identify who absorbs the mismatch in operating hours, rather than to assume that it cannot be bridged. If an issuer or intermediary pays first and handles the underlying shares later, the user’s wait shortens while inventory and funding burdens move to the provider. Whether those burdens are managed through prices, reserve funds or contractual terms affects the service’s durability.

Acceptance of a redemption request, provision of a quote and completion of payment are also separate moments. Combining them under the single term “operating hours” prevents comparison with the deadline that matters to the user. A route returning cash and a route returning underlying shares support different subsequent transactions. The availability of one does not imply immediate availability of the other; the endpoint of the chosen route needs to be established.

Read exceptions as part of the price

A service with suspension exceptions need not be worthless simply because it can stop. What matters is the relationship between circumstances likely to trigger an exception and circumstances in which users most need to cash out. A service may be convenient on a quiet weekend but change its terms after major company news or sharp price movements. Average convenience and value in an urgent situation then require separate assessment.

The same applies to competition. A provider advertising longer acceptance hours and another offering shorter hours but more predictable delivery can serve different needs. Comparing the conditions under which prices become firm, and which assets become freely usable when, is more practical than simply ranking the longest published hours.

Compare volatility using the same clock

Realized volatility is the square root of summed squared five-minute log returns. Tokens’ median was about 1.5× underlying markets’, but measured over 24 hours versus regular U.S. hours.[2] This ratio cannot be reinterpreted as a fixed percentage increase in loss risk over an identical holding period.

Longer observation also records reactions to information invisible within a shorter window. It is necessary to distinguish newly created risk from changes that previously accumulated while a market was closed and appeared together the following morning. Extending trading hours can increase risk itself, or distribute the times at which it becomes visible. Those possibilities affect required funding and operational staffing differently.

Comparing simultaneous hours and comparing the experience of a day

Testing requires two series. One compares only hours when both markets are open, helping examine differences in structure. The other compares the price changes holders of each product experience over a full day, which matters for actual collateral and order management. Both are useful, but answer different questions; neither should substitute for the other.

Even at the same time of day, a lightly traded market may show an unchanged last price for a long period and then adjust in a single step. Mechanically comparing frequent with infrequent updates can mistake observational differences for economic stability. Examining the treatment of intervals without trades and changes in bid–ask spreads helps reveal conditions that a price series alone cannot show.

Checks needed before incorporating a measure into risk limits

A financial institution using such indicators for collateral assessment should examine prices and quantities during the hours in which it might actually need to liquidate, alongside calm-period medians. The size of a price movement is separate from the quantity that can be sold at that price. Even if volatility calculated from small executions looks subdued, the same price may not hold during a large sale.

Conversely, a participant able to sell gradually and obtain necessary funding elsewhere may withstand a large temporary price movement. Comparison therefore needs consistent holding purposes, liquidation deadlines and order sizes, rather than one risk score for a product. Applying statistics in practice is less about memorizing an observed number than establishing the conditions under which it is relevant.

How to link the exchange of cash and securities

Federal Reserve Bank of New York researchers distinguish immediate settlement from settlement linking final securities and funds delivery as mutual conditions. The latter can occur after trading.[9] The Financial Stability Board (FSB) likewise distinguishes DvP—conditional securities and funds delivery—from mere simultaneous processing.[10]

Users comparing services should map the moment an agreement becomes binding, the deadline for preparing assets and the procedure on failure, rather than infer elapsed time from the term “atomic.” Measuring only successful processing omits transactions waiting for funds to return. Financial institutions need both routine and exception processes to determine the times they can promise customers.

For users, behavior on failure matters as much as behavior on success. If only one asset is ready, when is it released? If communication breaks, can resubmission create a duplicate trade? If a user regards a transaction as abandoned while the counterparty still regards it as valid, which record governs? Faster processing alone does not eliminate these questions.

Netting efficiency and collateral commitments

To examine funding needs, consider an asset manager selling one security and buying another. If sale proceeds can fund the purchase, externally supplied cash may approach the difference. If both trades must instead be fully settled in advance at separate locations, the manager must wait for the sale to finish or fund the purchase independently. This is a hypothetical process comparison, not an estimate of savings in a particular market.

Netting is not determined simply by sale and purchase amounts appearing to match. Counterparties, the legal scope of offset, processing cutoffs, currencies and collateral treatment must align. A user’s asset statement may show inflows and outflows on the same day that the operator cannot contractually connect. Calculating potential funding savings requires distinguishing the arithmetic difference from the amount actually payable.

Waiting has both benefits and burdens

Waiting briefly to combine transactions can reduce funding needs while leaving obligations unsettled for longer. Completing early can shorten that interval while potentially requiring earlier placement of cash or assets. The cheaper option depends on the protection required while waiting relative to the cost of arranging funds early. When one type of risk replaces another, a reduction in only one should not be presented as a fall in total costs.

The burden of holding cash depends on the commitment period as well as the balance. The same amount has different availability for other trades depending on whether it becomes unusable before an order executes or is required only immediately before exchange. Even a short average processing time may leave users holding additional balances for exceptions if funds in failed transactions take a long time to return.

Measure where reuse of funds stops

The useful comparison follows how often the same funds are reused and where they wait in between, alongside total daily trading value. Crossing between an issuer, exchange, bank and custodian can create intervals in which funds have been released in one place but remain unusable in another. Shortening those intervals could improve funding efficiency without changing the settlement label.

Counterevidence would be reliable operation in which immediate exchange permits smooth reuse of assets and funds with almost no additional balances. That would require revising the view that faster settlement always lowers funding efficiency. Conversely, netting that still requires substantial collateral or protective funding cannot be judged superior from its nominal offset amount alone. The comparison must include all commitments before and after netting.

Which currency completes final settlement?

The international Principles for Financial Market Infrastructures treat liquidity preparedness, settlement finality and the credit and liquidity characteristics of settlement assets separately. They favor central bank money where practical and available, with risks managed when another asset is used.[11] These are not new token-specific rules; they provide a foundation for separating completion of exchange from the nature of what is received.

Selling one token and receiving another used for settlement can complete an on-screen trade. If the user’s objective is payment from a bank account, however, conversion and transfer remain. A trade-execution record and possession of the ultimately desired payment instrument should not be treated as the same completion point. Corporate treasury management needs to identify who supplies the balances required in between.

The same face value and the same payment capacity

Assets denominated in the same currency unit need not give a company identical payment capacity if acceptance and usable hours differ. Matching face values does not mean an asset can directly discharge every obligation. Evaluation must include the cost and time of conversion into an asset accepted by the intended recipient. Stablecoin reserves and redemption conditions provides an introduction to that examination.

A small normal-period difference can widen when demand concentrates. If many participants seek the same payment instrument, the conversion endpoint may fall behind even when individual trades finish quickly. Conversely, a wider circle of recipients willing to use the received asset directly can reduce the need to convert out. Convenience depends on the reach of acceptance as well as technology.

The value of showing completion in several stages

Operators can make status more useful by distinguishing order execution, token transfer, acceptance of conversion and availability of funds. Identifying responsibility and the next expected step at each stage lets users judge whether a required payment can be made on time. Calling everything “complete” simplifies the interface but obscures whom to contact when something goes wrong.

Assessing market growth should therefore follow whether operations can be traced through to final use of funds, alongside secondary-market turnover. A system that works only while exit demand is small supports a different scale of corporate funding from one that can also process a congested exit. Verifying that endpoint is essential for connecting settlement-speed figures to economic confidence.

The cost of synchronizing participants’ operating hours

Keeping a market open longer involves more than running servers for additional hours. It requires coordination among those quoting prices, replenishing funds, checking custody and reconciliation, and stopping abnormal activity when needed. As more routine processes become automated, the points at which people must resolve exceptions need clearer definition.

These costs need not rise proportionally with service hours. The external tools available on a weekday afternoon may differ from those available on a weekend when underlying markets are closed. Even with similar order counts, the latter may require more room in price-verification methods or funding routes. Adding up operating hours alone cannot reveal the cost of supporting difficult periods.

An improvement in average completion time also needs decomposition. Faster eligibility checks, more counterparties and larger funds placed in advance mean different things. In the last case, the user’s wait may fall while the operator’s funding burden grows. Assessing speed and durability requires comparing time saved and balances added over the same period.

Design for exceptions across organizational boundaries

When several systems are involved, completion in one place alongside an unprocessed state elsewhere can become a problem. Users need information to decide whether to resubmit or wait, while operators need clear responsibility for duplicates and cancellations. Increasing throughput while leaving that boundary unclear can suddenly expose manual burdens that were hidden while exceptions remained rare.

A financial institution deciding on adoption should examine the number of organizations involved in resolving an exception and how long assets remain unavailable, as well as normal processing volumes. Improvements there make it easier to judge that automation has reduced actual operational work. Faster routine processing that merely shifts exceptions elsewhere should be distinguished from efficiency across the whole process.

Where liquidity remains across trading venues

More trading venues give users more entry points while dividing orders for the same economic exposure among locations. If orders can reach each other, dispersion can support competition; if they cannot, individual markets may become thinner. The number of entry points and the capacity to trade a required quantity need separate measurement.

For a liquidity provider, inventory location becomes an issue. Holding enough assets everywhere makes it easier to meet orders but increases unused balances. Centralizing assets and moving them as required can improve funding efficiency, but transfer time limits responsiveness. Fragmented liquidity is therefore not necessarily resolved merely by making orders easier to find.

The gap between the best price and an accessible price

Even if users can see the best price across all markets, they cannot execute it without permission and funds at that venue. A service consolidating quotes and one connecting orders through settlement provide different value. Financial institutions assessing connectivity investment should evaluate improvements separately in information collection, order submission and the return of assets after trading.

A price movement in a thin market may also feed valuations elsewhere. If the reference source does not switch automatically, a few executions can have wide effects. Conversely, comparing independent prices and conditioning their use on quantity and update frequency can reduce one venue’s distortion. The selection of price information and actual connectivity matter more than venue counts.

What to check after participation grows

The expectation that adoption will naturally integrate everything has conditions. New participants can add depth if they bring different funding sources or demand at different hours without sharing existing constraints. If additional firms simply borrow from the same provider and reference the same prices, competition in normal periods may grow without greater independence under stress. More venues should not automatically be equated with risk diversification.

Breaking down financial institutions’ business economics

Assessing a tokenization service’s profitability requires more than multiplying turnover by a fee rate. Account onboarding, eligibility renewal, customer support, custody, rights administration, quoting and funding replenishment are continuing requirements. Their costs depend on different quantities—users, orders, balances held and exceptions—so one growth rate cannot explain the economics.

A business adding small-scale users, for example, may incur onboarding and inquiry costs before turnover value grows substantially. A business serving a few large liquidity providers may have few accounts but significant fixed costs for connectivity and funding arrangements. The same turnover can therefore accompany different cost structures. The user’s purpose needs to be matched with the processes the provider undertakes.

How costs are distributed to users

Pricing also involves choices. Charging per order tends to allocate costs to frequent traders, while charging by holdings spreads the burden to long-term holders. Embedding charges in bid–ask spreads simplifies operation but makes costs less visible. None is invariably wrong, but users need a clear account of the service for which they are paying.

A period that appears profitable may still accumulate future costs. Counting revenue from normal trading while treating infrequent processes such as corporate actions or asset recovery separately can make profitability look better. Without identifying who ultimately bears those costs, low charges cannot be attributed confidently to technological efficiency rather than burdens yet to appear.

Costs that scale changes, and costs it does not

More trading can reduce fixed cost per transaction. The cost of placing funds or bearing price movements, however, may not fall merely because more transactions are processed. That distinction helps test claims of efficiency from business expansion. A lower unit cost of technical processing can coexist with a different trend in total costs if funds must remain committed for longer.

A company assessing adoption should align the conditions under which existing and new routes serve the same purpose. Comparisons with different customers, trading hours, holding periods or destinations for returned funds cannot isolate the reason for a cost difference. With consistent conditions, identifying where user effort, operator balances or exception-handling burdens have fallen connects advertised speed with business improvement.

Tracing transmission to international markets

Allowing participants worldwide to order the same underlying exposure at different times reduces the mismatch between local daily routines and underlying-market hours. The ability to trade without waiting for a conventional opening has value. Yet intermediaries’ capacity to connect that demand to actual underlying-share transactions need not grow as quickly as user numbers.

The first transmission channel is orders for underlying shares. Token demand that prompts issuance or adjustment of backing assets may lead intermediary purchases into the underlying market. If existing holders are simply trading tokens among themselves, however, the entire turnover is not a new share purchase. Token turnover cannot directly establish net inflows into the cash market; outstanding issuance and intermediary trading need to be distinguished.

Funding and information cross borders separately

The second channel is funding. Users in different regions needing the same settlement currency may increase demand for its providers. Longer user trading hours can also shift the hours in which funds need replenishment. This concerns where demand for short-term funding and cash-conversion services arises, rather than implying a rise in underlying share prices.

The third channel is price information. A price formed during thin trading in one region can influence collateral valuations or order decisions elsewhere without direct movement of funds. Alongside volume, the relevant question is which institutions reference which prices. A small market can matter if its prices are used widely; even growing turnover may have limited informational transmission if it does not inform other decisions.

Keep foreign exchange and regional restrictions in the analysis

Easier access to foreign assets does not remove currency effects when the user’s spending currency differs from the investment’s denomination. Product eligibility and residence restrictions also do not disappear merely because a transfer is technically possible. Evaluating international access requires tracking transferability, contractual eligibility and usable cash-conversion routes separately.

The scale of transmission depends on where one-sided demand concentrates, rather than just total turnover. If many venues use the same funding provider, custodian or underlying-share processing channel, apparently dispersed trading can converge at one point. Independent alternatives, by contrast, can create more capacity to absorb differences in regional operating hours. International financial effects depend more on this connectivity than on a product’s novelty.

Rules change the combinations that are possible

On the regulatory side, a September 17 SEC order established temporary, conditional exemptions for specified venues and others dealing in defined tokenized NMS stocks. Published in the Federal Register on September 22, its definition excludes synthetic price-linked products and requires corresponding rights, among other conditions.[12] It cannot be read as blanket approval of all linked tokens or of particular issuers.

The European Central Bank’s (ECB) June 2025 report examined new-technology settlement in central bank money and technical all-or-nothing completion in 2024 trials, identifying liquidity commitments and exception handling as challenges.[13] Legal finality should be assessed separately under the infrastructure principles discussed above.[11] Results from bounded exploratory work need to be distinguished from proof of processing capacity across a permanent market.

Align what is permitted with what the technology handles

These background sources help avoid combining regulation and technology into a single stage of adoption. If the rights attached to products permitted by a rule differ from the assets exchanged in a technical experiment, the success cannot simply be transferred. For a financial institution, adoption depends on whether permitted activities, products, available settlement assets and necessary participants fit together as one operation.

Clearer rules may let providers reduce extra costs reserved for future design changes. Clarity need not, however, mean easier entry conditions. Additional reconciliation or custody processes may be needed to align the rights of covered products. Compliance costs and the benefit of more predictable rights should be compared over the same time horizon.

The boundary between an experiment and continuing operation

An experiment can limit participants and transaction types. Continuing operation must handle changing volumes, departing and new participants, and unexpected combinations. Technical exchange achievements deserve recognition, alongside broader assessment of participant changes and responsibility during failures. That identifies what needs to be demonstrated next rather than diminishing the experiment’s value.

Connecting regulatory and technical progress to economic benefits requires following repeated use, failed transactions and assets committed until resolution, as well as approvals and connections. More evidence from continuing operation lets institutions set exception buffers more concretely. At that stage, user convenience and operating costs become easier to compare as a durable business.

Test strong counterarguments against specific conditions

The first counterargument is that market maturity will naturally reduce price gaps and thin order books, making detailed discussion of current constraints less useful. If correct, the cost of trading a fixed quantity should fall and stabilize across more time periods as participation grows. But if access to direct exchange routes remains restricted despite higher trading, limits to convergence may persist.

The second is that immediate processing reduces exceptions and unsettled-obligation management enough to outweigh early funding. That is possible. Testing it requires comparing the cost of additional funds placed with the reduction in reconciliation, collateral and failed-processing costs for the same business activity. Measuring only one side can make either design appear favorable.

The third counterargument is that users seeking price exposure do not need underlying-share rights or direct redemption if they can sell in a secondary market. That can be rational for short holding periods or small positions. Its benefit nevertheless assumes that providers supporting the secondary market continue to respond. Not needing a direct right does not mean indirect dependencies disappear.

Use a framework that can also explain unfavorable results

Both supportive and critical views need conditions under which they would be disproved. Falling costs and better handling of unusual events should not be disregarded simply because the mechanism is new. Conversely, more use does not justify declaring maturity from counts alone if quoting concentrates in a few entities and exception delays remain long.

These conditions move discussion beyond a simple position for or against tokenization. They permit a judgment about which uses offer benefits greater than costs, and which are better served by another method. Allowing different arrangements to coexist for different purposes is more helpful in explaining observed market changes than assuming one technology will replace every user’s existing approach.

Indicators to observe next

The next tests need to measure use and exchange capacity over the same period. On days when volume increases, examine executable spreads, quoted quantities and the time until funds return. Pairing growth series with evidence that users completed their objectives makes improvements easier to evaluate than selecting only the fastest-growing indicators.

A fixed sample also matters. If the market average changes whenever products are added, improvement in existing products becomes obscured. Track continuing underlying–issuer–venue combinations separately from new additions. This is a condition for comparable observations of what changed, rather than an adjustment designed to obtain a particular conclusion.

Operational records should include requests abandoned partway through, as well as successful transactions. Measuring only completed trades can improve the average even when users facing difficult conditions give up at entry. Separating reasons for rejection, cancellation, suspension and resumption can describe the service’s reach and limits more accurately.

Pay attention to situations outside the average

Episodes with more exceptions also need separate examination. Major company news, divergent movements in the underlying and settlement-currency markets, and concentrated selling require different operational capabilities. A single average can let improvements in normal periods conceal deterioration in difficult ones.

With this information, assessment can move beyond whether adoption exists. It becomes possible to compare which markets need connecting, when funds should be placed and which product rights should align. Market-structure research helps providers and policymakers by making the next improvements testable, as well as documenting new forms of trading.

From evidence of demand to evidence of operation

Measuring price information and delivery capacity separately clarifies the next tests required. Converting demand into economic benefits requires examining price information, rights, funding and delivery as a continuous operation. The next stage is to establish conditions that an active trading screen alone could not reveal.

On prices, the starting point is comparison of several markets for the same underlying at the same time and quantity. Testing the usefulness of after-hours prices requires separating responses to common information from venue-specific imbalances and incorporating execution costs. On usage, small-trade counts should not be reinterpreted as capital reach; the task is to follow which users keep participating and for what purpose.

Build improvements one at a time

On delivery, align rights and eligibility and decide when assets and payments exchange. If speed improves, check the additional balances or exception burdens that made it possible. If funding efficiency improves, establish who protects obligations while participants wait. Adding these effects separately permits assessment of concrete progress without assuming that one method solves everything.

The next question is whether trading growth comes with independent exchange routes and durable operation. New participants, lower costs for comparable trades and dependable asset availability during difficult conditions would strengthen the evidence for improvement. Opposite observations would call for revisiting connectivity and funding design. Once demand is established, the question is under what conditions it can continue to be served.

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