Tokenized stocks are one of the newest digital assets now available all over the world. These tokenized versions of stock shares are great for a few reasons:
- You can buy just a piece of a stock instead of having to buy an entire stock
- It’s much easier and cheaper to buy and sell Tokenized Stocks vs. real stocks depending on where you live
- Unlike the Stock Market, you can trade Tokenized Stocks 24/7
- If you don’t want to trade individual stocks, you can invest in the S&P 500 with the SPY ETF
Tokenized stocks are tokenized derivatives that represent traditional securities, particularly shares in publicly traded firms on regulated exchanges, such as Tesla, Apple, and Facebook or ETFs like SPDR S&P 500. The key benefits of tokenized stocks include fractional ownership of traditional securities, 24/7 access to markets, and greater liquidity – to name a few. These digital assets are backed 1:1 to traditional stocks, entitling holders to the same economic benefits of owning the underlying stock.
Tokenized stocks are a tokenization of a digital total return swap contract (similar to contracts for differences). The tokenized stocks value is based on and collateralized with the underlying asset, a traditional security (typically a publicly traded equity) and the value of the digital asset is determined by the value of the traditional security. They are collateralized by an equivalent notional amount of the traditional security (i.e., $100 of the debt derivative would be collateralized with $100 of the traditional security). This allows tokenized stocks to mirror the economic performance of the applicable reference traditional securities.
Tokenized stocks may also represent innovative baskets or indexes of traditional securities as well as traditional securities plus cryptocurrencies (for example, the S&P 500 AND BTC). Tokenized stocks may also include leverage, as well as long or short exposure.
24/7! Note, however, that the liquidity of the underlying assets may vary over the course of the day and week, and that might be reflected in the liquidity of Bittrex Global’s markets.
You trade tokenized stocks the same way you trade other markets. Fees, API calls, and GUI instructions are all the same. Customers can now purchase these shares with cryptocurrencies or fiat on the Bittrex Global platform, allowing customers to build their wealth and grow their investments by lowering the barrier to entry for blue chip stocks and other traditional securities.
Tokenized stocks are spot tokens, like BTC/ETH/etc. and will show as customer balances for customers holding tokenized stocks.
Bittrex Global itself lists tokens that represent derivative contracts collateralized by the underlying traditional equities. These tokens are backed by shares of stock powered by CM-Equity AG (“CME”). The parties involved in the lifecycle of the tokenized stocks are:
(a) Customers, who acquire an interest in a tokenized stock through Bittrex Global;
(b) Bittrex Global (Bermuda) Ltd., who provides the Bittrex Global exchange for customers to trade their interests in tokenized stocks;
(c) Alameda Research Ltd. (“Alameda”), who is granted a line of credit evidencing the digital derivative representation of the equivalent financial interests in the underlying traditional securities represented by the restricted digital tokens held by Alameda in its account with CME;
(d) CME, who purchases the underlying securities through Interactive Brokers, LLC, and maintains the restricted digital token representing the financial interests in the underlying traditional securities in the account of Alameda; and
(e) Interactive Brokers, LLC, who holds the underlying securities in a custodial account for and on behalf of CME.
Tokenized stocks cannot be withdrawn from Bittrex Global or redeemed for the underlying shares. In the future, there may be ways to withdraw the tokens from Bittrex Global or redeem the tokens for the underlying stocks.
For now, there are only spot markets. There is a possibility that other products may be listed in the future.
No. Tokenized Stocks can only be bought, sold and traded on the Bittrex Global exchange. You will not be able to withdraw your Tokenized Stocks to other exchanges or wallets.
Tokenized stocks are powered by CME and are fully backed by the actual underlying security.
The underlying security is custodied by licensed partner banks in Europe and traded on fully regulated exchanges through fully regulated brokers. Each collateral transaction is subject to best execution principles ensuring the best price. Tokenized stocks are derivatives of these stocks. Bittrex Global (Bermuda) Ltd. is licensed to offer these products pursuant to the Digital Asset Business Act 2018 license issued by the Bermuda Monetary Authority.
For different areas we may be required to cooperate with licensed financial institutions as partners in order to offer a compliant and regulated environment. Depending on your jurisdiction, this may require a special onboarding procedure.
Currently, eligible Bittrex Global customers outside of the European Union, the European Economic Area, Switzerland, and the United Kingdom my trade tokenized stocks on Bittrex Global. We anticipate that Bittrex Global customers in these jurisdictions will be able to trade tokenized stocks in the future. Bittrex Global may also collect further information from prospective users and may require passing additional tests in order to trade tokenized stocks. Further compliance measures may be used as appropriate.
You cannot trade tokenized stocks on Bittrex Global from any banned jurisdictions, including the United States. Note that the set of banned jurisdictions is subject to change. Users are encouraged to consult their personal and local situation in order to determine whether trading tokenized stocks on Bittrex Global is right for them.
Generally price charts on Bittrex Global provide a visualization of each completed trade in the applicable market to provide a complete picture of the performance and history of that market. Occasionally, however, Bittrex Global will instead show midpoint data (i.e., the midpoint between the highest bid and the lowest ask) for charts in markets where less trading data is available. This is primarily used for newly launched markets which therefore have a shorter history and fewer trading data points.
Using midpoint data for newly launched and certain low data markets allows traders to have a more accurate picture of market interest and price movement in these markets. For these markets, midpoint data provides better historical context as well as richer data for statistically relevant technical analysis. This analysis allows traders to make more effective use of the chart tools as they investigate trading opportunities.
We rely on a simple average to find the midpoint. We do this by averaging the best (highest) bid price and the best (lowest) ask price, following the formula (BestBidPrice + BestAskPrice)/
Best Bid: $487.50
Best Ask: $490.20
Mid Price: $488.85
Formula: (487.50 + 490.20)/2 = 488.85
Holding tokenized stocks on Bittrex Global entitles users to dividends, and other economic benefits of holding the underlying stock. Bittrex Global will pursue all reasonable actions to have the tokens on Bittrex Global reflect the corporate actions of the underlying equities, including through dividends and stock splits. Tokenized stocks do NOT represent any shareholder rights in the companies issuing the underlying stocks, including voting or proxy rights.
Any dividends and distributions declared and paid on the underlying stocks will be paid by the custodian holding such stock to CME, who in turn will facilitate onward payment to Alameda who will deposit the same into their Bittrex Global account for crediting to the accounts of the holders of tokenized stocks in the equivalent pro rata amounts represented by the tokenized stocks held, all subject to tax withholding. It will be up to each user to understand the tax consequences of any dividends or distributions they receive.