The Securities and Exchange Commission cleared a path for tokenized stock trading in the US on September 17 with a five-year exemption.

“Today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the ‘Innovation Exemption,'” SEC Chairman Paul Atkins said.

Binance’s bStocks, launched offshore on June 11, show the demand: over 80% of trades in the first 15 days were fractional, and Tesla ran at 99.65% with a median order of $14.57. Users “increasingly expect access on their own terms,” Shunyet Jan, head of exchange and trading at Binance, said in a July 29 statement.

Fractional does not mean small

Fractional orders made up 88.5% of Tesla’s traded value, and emerging markets drove 58% of the $458 million traded in the first 15 days.

“The private market is where real alpha really lives. But it was always gatekept to top 0.1% through paperwork, minimum tickets and geography,” Chan Ahn, founder and CEO of tokenized share platform Tessera, said on the On The Margin podcast.

Tessera sells exposure to private companies such as SpaceX. “It’s an asset class that is very difficult to access. And of course you have to have a hundred thousand US dollar or more,” Ahn said.

Binance Research found SanDisk’s share price exceeds the average monthly salary in 17 of 22 regions it measured.

“Not only do we give access to the retail we currently don’t have access to, but private assets also don’t have the liquidity that both retail and institution-based investors want and need,” he said.

Holding, not churning

Around 70% of users held rather than traded daily, and roughly 40% of first-week trades came in under $100. Ahn rejects the idea “that retail investors, for example, don’t know as much as institution investors, especially with all the social media and information that is available.”

“I think that is absolutely untrue unless institutional investors have inside information to act on, which is illegal,” he said. “So I think there is an information parity in place, generally speaking.”

The weekend trade

Some 47% of bStocks trading happened outside US market hours.

“Unlike traditional VC … where you are subject to five-year lockup or very little secondary market availability, you can actually trade 24-7,” Ahn said.

Nic Roberts-Huntley, co-founder and CEO of Blueprint Finance, said on the same podcast that the weekend window has an institutional use, describing “thinking about tokenized stocks trading twenty-four-seven, thinking about being able to sit on a Friday afternoon at a traditional long short hedge fund and perhaps selling risk into a weekend market in the form of digital assets in a regulated environment so that a chief compliance officer doesn’t call you and tell you to reduce your exposure.”

Ethena said on September 25 it would use bStocks as collateral for a basis trade hedged with Binance equity perpetuals. Roberts-Huntley said institutional money has held back for a plain reason.

“Realistically the risk reward just has not been there. I think what we’ve asked a lot of like institutional finance people who sit in their traditional roles and have very, very fixed practices is to say, you must change fundamentally what you do to get exposure to something that is just a fraction of the size of what you have. That doesn’t make any sense whatsoever.”

What the US exemption has to prove

Tokenized stocks recorded $20.9 billion in decentralized exchange volume over 30 days to late September, and US brokers already sell fractional shares, so the exemption mainly tests settlement and the 24/7 window.

“I think there are ways in which digital assets can become a bolt-on at first traditional finance and then slowly creep their way into being more kind of mainstay and daily practice,” Roberts-Huntley said.

“But I think it has to be a little bit more invisible. I think it has to be a little bit more subtle than perhaps we want it to be, because we all love what we do. But I do think it has to be subtle, complementary, and not necessarily disruptive.”