By PYMNTS | October 12, 2026
Tokenized securities are demonstrating genuine investor demand for around-the-clock trading and fractional ownership, but the infrastructure needed to provide adequate liquidity, price stability and investor protections has yet to catch up, according to a new report from the International Monetary Fund.
The IMF also found in its October Global Financial Stability Report that tokenized stock trading is beginning to play a role in price discovery, with price movements occurring outside conventional trading hours subsequently reflected in traditional equity markets. The findings raise questions about how securities regulators should oversee markets that operate beyond the established boundaries of conventional exchanges.
The findings appear in Chapter 3 of the report, “Scaling Tokenization: New Efficiencies, New Vulnerabilities,” which examined the opportunities and vulnerabilities associated with tokenization, the process of representing financial assets on blockchain networks.
Researchers examined five major tokenized equity products across 11 trading venues, finding that more than half of transactions occurred outside regular stock market hours in the United States. Approximately 80% of trades involved less than one share, suggesting that investors were using tokenization to gain access to markets at times and in quantities that conventional trading arrangements may not accommodate.
However, the study also found that tokenized stocks exhibited approximately 1.5 times the volatility of their conventional counterparts, while liquidity was particularly thin on decentralized exchanges.
The findings suggest that expanding market access does not necessarily improve market quality. Investors trading tokenized equities may encounter wider price fluctuations, higher execution costs and greater difficulty exiting positions, particularly when conventional exchanges are closed.
Perhaps the IMF’s most consequential finding concerned the relationship between tokenized trading and conventional stock prices.
The researchers found that between 87% and 99% of overnight price movements in tokenized equities were reflected in their conventional counterparts after traditional exchanges reopened. That suggests tokenized markets are doing more than reproducing prices established by conventional exchanges. They are incorporating information into asset valuations while those exchanges are closed, creating price signals that traditional markets subsequently absorb.
For regulators, the development complicates longstanding assumptions about when and where price discovery occurs, an April IMF analysis found.
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Conventional securities markets operate within established trading sessions, supported by mechanisms including trading halts, market surveillance and safeguards against extreme volatility. Tokenized securities, by contrast, can trade continuously across centralized and decentralized platforms, potentially including periods when trading in the underlying shares has been suspended.
The resulting regulatory challenge extends beyond whether tokenized securities qualify as securities under existing law. It also concerns whether conventional market protections can function effectively when trading in economically linked instruments occurs across multiple venues and regulatory jurisdictions.
The IMF also highlighted in its October report differences between tokenized instruments that confer ownership rights in underlying securities and synthetic products that merely provide economic exposure to their prices.
Those distinctions matter because buying a token linked to a company’s shares does not necessarily provide the same voting rights, dividend entitlements or legal protections as owning the shares directly.
The report identified products associated with Ondo Finance and Backed Finance’s xStocks as major participants in a tokenized equity market estimated at approximately $2.3 billion.
Fragmented liquidity across blockchain networks and trading platforms creates additional challenges. Unlike conventional markets, where established intermediaries and infrastructure help connect trading activity, tokenized markets may operate through systems that are not readily interoperable.
The IMF also identified risks associated with continuous settlement, which can reduce counterparty exposure but require financial institutions to manage liquidity obligations around the clock.
For securities regulators, the findings point toward a growing need to examine trading safeguards, custody arrangements, settlement systems and market abuse surveillance across conventional and tokenized venues.
The central challenge is that tokenization is beginning to extend securities trading beyond the hours and infrastructure that existing regulatory protections were designed for, even as conventional markets increasingly respond to prices established outside those boundaries.