Tokenized Stocks Will Trade 24/7. Wall Street’s Infrastructure Wasn’t Built for That

When you build, the first job is the foundation, but sometimes the ground is soft. Engineers adapt. They pour extra concrete, drive piles, hang the building on an elaborate skeleton that would never have been the design if they had been free to build from the bedrock.

U.S. equity market structure is that building. For forty years, smart engineers have adapted so it could handle volumes that, many times, threatened to bury the original system. The foundation is still immobilized paper certificates, held in the old Depository Trust Company vault under 55 Water Street, and a chain of “street name” entitlements that sit on top of it. Book-entry made the paper stop moving. It did not make ownership native to the network that now moves the money.

This summer, announcements of 24/7 trading and tokenization have come fast: Nasdaq targeting a 23 hour, five day session; SIP hours stretching toward overnight; NSCC extending clearing; NYSE building a tokenized venue; an SEC roundtable on September 17 to talk about a market that never really sleeps instead of T+1 settlement. The industry can take two routes. It can keep most of today’s plumbing intact while tokenizing and bolt blockchain technology onto a system using the same actors and processes, or it can use it to rebuild the foundation.

Rebuilding a system that does not take advantage of what modern blockchain actually offers would be a mistake. It might work for a while. It will not survive competitive pressure from jurisdictions and venues that start over.

Tokenization has several inherent advantages over paper certificates and the entitlement stack built to hide them. Three matter most for a 24/7 market: verifiability, composability, and, most important, transferability. All three come from the same place: a shared, verifiable ledger that can prove who owns what without asking a monopolist to look it up after the fact.

Verifiability means any authorized participant can confirm title, position, and the history of transfers against the same record, in near real time, without waiting for a nightly batch, a transfer-agent file, or a DTCC report that exists because the official owner on the issuer’s books is still a nominee. Today, issuers famously know almost nothing about their own holders. Beneficial owners sit at the end of a chain: issuer → DTC participant → broker → customer. Proxy season is an archaeology project. Corporate actions are exception processing. A token that is the share or a tightly coupled, legally recognized entitlement whose state lives on a ledger participants can independently inspect, collapses that fog. You do not have to trust the vault. You can check the ledger.

That is not a slogan. It is operational. Overnight and weekend markets do not have the luxury of “we’ll figure out who owned it on T+1.” If a position is going to be pledged, lent, recalled, or used as margin at 2 a.m. Sunday, counterparties need to know it is there and unencumbered. A system that still treats the blockchain as a mirror of DTC’s books, with DTC remaining the source of truth, gives you a prettier audit trail. It does not give you independent verifiability. The firms that make the most money from the current arrangement will happily sell you the prettier audit trail. That is using a fraction of what the technology can do in order to protect the rest of the stack.

Composability is the part traditional infrastructure cannot fake with an API. Once ownership is a digital object with clear rules, it can move into other contracts without a new bilateral legal project every time. Collateral that is idle in a cash account overnight can be posted, reused, and released while Tokyo and London are open. A long equity position can sit in a lending pool, a structured note, or a portfolio margin engine without six faxed legal opinions and a weekend operations team. That is how crypto markets already treat assets. Equities will not stay competitive as 24/7 instruments if the share can trade at 11 p.m. but cannot be used for anything useful until Monday’s batch cycle finishes.

The closed-system version of tokenization, walled gardens at the largest venues, entitlements that can only live inside approved participant wallets, recreates the old monopoly with better branding. DTCC earned that monopoly honestly in the 1970s paper crunch. Volumes overwhelmed the back office; street name and immobilization were the adaptation that kept the building standing. That made sense then, but copying the same central-counterparty, closed-ledger logic onto a token is how you get a club that works, at a price that keeps smaller competitors on the outside. There is a debate, right now, between firms that want tokenization forced into those gardens and firms building a more open system. The first group will tell you it is about investor protection. Some of it is. A lot of it is about keeping order flow, clearing fees, and collateral trapped where they are today.

Transferability is the advantage that makes 24/7 trading via tokenization more than a longer tape. A paper certificate or a book-entry entitlement that still depends on a transfer agent, a depository, and a settlement date does not move when the banks are closed. Stablecoins do. Tokenized Treasuries increasingly do. If the equity cannot move with the cash, you have not built a 24/7 market. You have built a 23-hour matching engine sitting on a Monday-to-Friday legal system.

Atomic or near-atomic delivery-versus-payment against a dollar token is what closes that gap. Trade and settlement become the same event. Counterparty risk between match and T+1 shrinks instead of widening, which is what happens when you stretch trading hours across a batch-cleared backbone. NSCC going 24/5 is a serious operational achievement. It is still a batch system running more shifts. The risk interval between “the tape printed” and “you actually own it” gets longer, not shorter, unless the asset itself can transfer when the print happens.

Transferability also forces a choice the industry keeps trying to postpone: is the token the share, with the same CUSIP, voting rights, dividends, and corporate actions, or is it a receipt, a note, or a tracker? Offshore platforms already sell all three and the current argument between the CEO of AMC and RobinHood are bringing this into focus. While the tracking stocks have a place in today’s market, eventually, the market should insist on one standard: fungible with the listed security, same rights, same issuer obligations—and a settlement rail that does not go dark because Fedwire did. Anything less and we will spend the next decade reconciling three products that share a logo.

None of this requires throwing out investor protection, best execution, or a central lender of last resort for failed trades. CoinRoutes has been building infrastructure that has provided best execution and superior risk management for digital assets and that can be extended to tokenized equities as well. In order to gain these advantages, however, it requires admitting that the current patchwork of regulations, using street-name holding, were brilliant patches on a paper foundation. They are the wrong foundation for a digital, increasingly global market.

Other venues will not wait for Wall Street to finish debating how little of the stack it can change. Tokenized listings with instant settlement and stablecoin funding are already live in pieces offshore and in pilots around the world and the U.S. should not risk losing all the advantages it gains from having the most efficient capital markets infrastructure worldwide.

The engineers who kept this market alive for forty years did their job. The next job is not another brace under 55 Water Street. It is a foundation that can carry a building that never closes.