What are Tokenized Shares and How to Trade Them?

A security is a share. Its owner is granted the right to a share of the profits as well as involvement in voting for the issuing company’s management.

To raise additional capital for commercial development, companies issue shares. The World Bank estimates that $61 trillion worth of stock was traded in 2021.

How do Tokenized Shares Work?

Tokenized shares are securities-linked tokens with a fixed price. Similar to stablecoins, a custodial company purchases shares and issues tokens backed by those shares.

Through the cooperation of the German-based, regulated financial institution CM-Equity AG, the FTX exchange offers trading in tokenized shares. Users of FTX can use it to swap tokenized shares for securities.

The holders of tokenized shares are entitled to dividends in the same manner as regular shareholders. According to the issuing company’s schedule, FTX credits them to the trading accounts of token holders.

Users of FTX can place market orders for up to 0.07% of the transacted value and limit orders for up to 0.02%. They can purchase shares in pieces and exchange them whenever they want.

Where can Stocks be Traded?

Major stock exchanges like the New York and London Stock Exchanges are where shares are traded. In addition, the majority of securities can only be purchased on regional exchanges. For instance, Chinese SPD Bank shares are traded on the Shanghai Stock Exchange whereas Apple shares are traded on the US Nasdaq.

According to the schedule, stock exchanges open in the late afternoon local time. Trading in stocks is halted at night, on the weekends, and on legal holidays. Trading participants must overnight pay a commission to move a position to the following day.

You must pass KYC and open a brokerage account with a bank or on a specialized trading platform like eToro in order to trade stocks on the stock exchange. Lots, packages of 10, 100, or more shares are used in the trading of shares. Trades involving fewer than one lot are not permitted. The broker determines how much the trading commission will be.

How may tokenized shares be traded on FTX?

The second stage of KYC on FTX, which verifies the trader’s identity, residential address, and source of income, must first be passed. After that, pass an exam on understanding stock trading as well as a test on a comparable topic in CM-Equity.

Almost all of the tokenized equities on FTX are dollar-denominated, therefore traders must fund their accounts with fiat money or stablecoins like TUSD, USDC, PAX, BUSD, and HUSD. The TSLA/BTC and TSLA/DOGE pairs are the exceptions.

Trading in tokenized shares works the same way as spot cryptocurrency trading. Market orders, limit and stop orders, and installment purchases of shares are among trading options available to traders. One hundredth of a share is the minimum order size.

Stock futures are traded on FTX in addition to the spot market, where traders purchase tokens and receive them on deposit. They let a trader use leverage and profit from declining stock prices.

On FTX, tokenized stock trading is available around-the-clock, but outside of market hours, the number of shares in the order book shrinks from tens of thousands to just a few hundred. As a result, even with modest transactions, the price drops.

What Tokenized Stocks Are Available to Buy on FTX?

On FTX, tokenized shares of 47 different companies are traded. They include:

• tech GOATs like Google, Apple, and Tesla;
• cryptocurrency firms like Coinbase, Grayscale, and Square;
• e-commerce service providers like Amazon and Alibaba;
• market leaders like Uber, Pfizer, and Airbnb;
• and brands well-liked by cryptocurrency aficionados like Nvidia, GameStop, and Robinhood.

Additionally, FTX created a TSLA/DOGE trading pair and introduced quarterly futures contracts on all tokenized stocks.

On the Vote page, users can cast their votes on the listing of new tokenized shares. You must have at least 10 FTT tokens in your account in order to vote.

When bitcoin is available, why purchase tokenized shares?

Compared to cryptocurrencies, stocks are less volatile, and stock market trends stay longer.

Morning spurts of volatility in the stock market happen as a result of short trading hours. During off-market hours, traders make judgments, watch the news, and immediately enter the market after it opens.