FTX, the Hong Kong-based digital currency derivatives exchange, has just launched tokenized equity trading on its platform. Through a partnership with German financial firm CM Equity AG and Swiss-based Digital Assets AG, FTX now lets its customers trade and redeem equities that trade in the US stock market.
— FTX – Built By Traders, For Traders (@FTX_Official) October 29, 2020
How it works
FTX has listed several digital currency and stablecoin to equity trading pairs on their platform. Some of the equities that are available on the platform at the moment are Facebook, Netflix, Tesla, Amazon, and the SPDR S&P 500 exchange-traded fund.
Through FTX, users can trade (buy/sell) tokenized equities, but if they are looking to redeem the token for its underlying stock, FTX users are going to have to go through CM Equity AG, the custodian of the securities.
Unlike the traditional equities markets, whose regular operating hours are 9:30 am – 4 pm in the United States, tokenized equity trading on FTX will be open 24/7.
“Note, however, that the liquidity of the underlying assets may vary over the course of the day and week, and that might end up reflected in the liquidity of FTX’s markets,” said FTX in their Equities FAQ.
Similar to the trading app Robinhood, FTX allows its users to trade fractions of the tokenized equities they purchase.
“These products demonstrate a powerful future, in which assets are digitized and traders have unlimited creative potential to express their beliefs about the markets,” said FTX CEO Sam Bankman-Fried. “These fractional stock products reflect the reality that today’s traders are industry and sector spanning and want trading opportunities that fully match their interests and mindset.”
FTX’s tokenized equity trading is not available in the United States and other restricted regions.
Will other exchanges follow suit?
The FTX tokenized equity offering is significant for the blockchain and digital currency industry. Many people believe that the future of finance is blockchain technology and digitizing traditional assets and securities so that they can run on blockchain. FTX being one of the first movers in this regard is bound to grab the attention of other financial institutions who are interested in using a blockchain to increase transaction speed while reducing transaction costs.
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