Estonian digital trading platform, DX.Exchange will begin trading tokenized stocks on the Ethereum blockchain next Monday according to the company.
The exchange – which has offices in Estonia and Israel – is licensed to trade by the Estonian Financial Intelligence Unit. It will enable investors to trade U.S. stocks such as Tesla, Facebook, Apple and Amazon outside of regular stock exchange hours. Many investors who are not resident in the U.S. often encounter difficulties in trading U.S. stocks and this offering circumvents these problems.
Initially, the company will offer clients the ability to trade 10 Nasdaq listed stocks. However, DX.Exchange plan on expanding the offering to include stocks from the New York Stock Exchange (NYSE), together with the Hong Kong and Tokyo exchanges.
The company will partner with MPS MarketPlace Securities Ltd. – who will go out onto the market and buy the actual shares on the Nasdaq. The corresponding amount of actual stock will be purchased to match the equivalent in digital tokens. MPS is regulated by the Cypriot Financial Regulator.
One other advantage that this approach brings is the ability to trade fractions of a share. At the time of writing, Amazon Inc. was trading at $1,520. The main tech stocks tend to have a higher share price. DX.Exchange’s approach means that small investors can trade at whatever level they feel comfortable with.
In an interview with Bloomberg, DX.Exchange’s CEO – Daniel Skowronski – commented on the launch:
“We saw a huge market opportunity in tokenizing existing securities. We believe that this is the beginning of the traditional market’s merge with blockchain technology. This is going to open a whole new world of trading securities old and new alike.”
It’s unclear how the United States’ Securities and Exchange Commission (SEC) view this development. However, the understanding at this time is that DX.Exchange falls outside of their remit in terms of regulation despite the fact that its offering is based in essence upon the trading of U.S. stocks as a derivative. There have been some attempts to achieve a similar offering previously but the SEC stepped in. The difference on this occasion is that DX.Exchange is regulated within the European Union by the Estonian financial regulator.
According to a press release, DX.Exchange maintain that tokenized stocks combine the best of both worlds:
“Digital stocks are backed 1:1 to real-world stocks traded on conventional stock exchanges. You purchase tokens for leading assets that you choose to invest in, such as Google, Amazon, etc. Therefore, when you are a token holder, you own shares of the company.”
In providing this financial product, DX will utilize Nasdaq’s Financial Information Exchange (FIX) protocol. The company also announced a partnership with algo-trading company, AlgoZ. The link-up will provide for greater liquidity in terms of DX.Exchange’s product offering.
Nasdaq itself has been active in the cryptocurrency sector in recent months. In November, sources close to the company revealed its intention to launch a Bitcoin Futures product in Q1, 2019. Alongside global asset manager, Fidelity Investments, it also was a key investor in digital asset trading platform, ErisX, last month.