What Happens to Tokenized Stocks When the Market Is Closed?

What happens to a tokenized stock when the stock market is closed?

The token keeps trading and the stock does not, so the token's price drifts with no reference to the thing it represents until the primary market reopens. The IMF's October 2026 Global Financial Stability Report found that more than half of trading in the tokenized stocks it studied happened outside regular US market hours, at volatility around 1.5 times that of the underlying. We quote books for a living and filed a comment with the SEC on exactly this, so our interest in the answer is commercial as well as analytical.

Why the gap is the whole problem

A liquidity provider on a tokenized equity has one job during US market hours and a different one outside them.

Inside the session, hedging is ordinary. The token trades, the maker takes the other side, and the position is offset against the listed stock or a future on it. Inventory risk has a price and that price is discoverable.

Outside the session, the hedge gets harder. As we put it to the SEC, a liquidity provider cannot cleanly hedge a single stock while its primary market is closed. Overnight venues exist and some single-name risk can be worked there, but they do not cover weekends and they do not cover every name, so for much of the week there is no clean offset for the specific stock a token tracks. An automated pool does not attempt one at all: it prices from its own reserves, with no reference to the national best bid and offer, because there is no NBBO to reference. Whatever the token drifts to over a weekend has to reconcile with the real opening price on Monday, and somebody absorbs that difference.

That somebody is usually the liquidity provider, and the loss concentrates at a single moment. This is unlike almost anything else a crypto maker quotes. A perpetual on ETH has a funding rate and a 24-hour reference; a tokenized share of a US listed company has neither for roughly two thirds of the week.

Why 1.5x is the number that matters

Volatility at about 1.5 times the underlying, with more than half of volume falling outside the hours when the hedge exists, is not a quirk of a young market. It is the arithmetic of pricing without a reference.

Depth is quoted against the risk of being wrong, so a maker facing 1.5x volatility and no clean hedge for most of the week quotes wider, or quotes less size, or both. Thin books then make the next print move the price further, which raises measured volatility again. The feedback is the reason this does not resolve itself as the market matures; it resolves when the structure gives the maker something to price against overnight.

What we recommended to the SEC

Our comment on the Innovation Exemption order for tokenized securities venues (File No. 4-927, published on the SEC comment file) made three recommendations, all aimed at the reopen rather than at the session:

• Publish the gap. For each stock, venues should publish the difference between the last pool price before the primary market opens and the opening price. That single series tells a prospective liquidity provider what it is underwriting, and it tells a buyer what the token did while they slept.
• Describe the overnight mechanism. Venues should set out how they price and protect pools while the underlying is closed, including any oracle, price band or dynamic fee. Right now a buyer cannot tell a venue with a band from one without.
• Capitalise against the reopen, not the average. Liquidity providers' capital should be assessed against a gap at the reopen, because that is where their losses concentrate. A capital test calibrated on average intraday volatility is calibrated on the wrong distribution.

The reasoning behind all four of our filings is in our write-up of the comments, and the filings themselves are listed on our regulatory page.

What an issuer or venue can do now

None of the above requires a rule to be finalised.

Publishing the overnight gap is a reporting change, not a market structure change, and a venue that does it differentiates itself immediately. Disclosing whether a pool has a price band is a sentence. Sizing a liquidity provider's capital against the worst reopen in the last year rather than against average volatility is a spreadsheet.

For an issuer choosing where to list a tokenized equity, the questions are the same three in reverse: show me the gap series, tell me what protects the pool overnight, and tell me how the provider is capitalised against Monday morning. A venue that cannot answer is asking the provider to carry a risk nobody has priced, and that cost reaches the buyer as spread.

We quote across centralised order books, Uniswap pools and perpetual venues, and we sell market making and market surveillance, so we would benefit from markets that are structured this way. The IMF's figures are public and the recommendations are on the SEC's file; both can be checked without taking our word for any of it.

Not investment advice.