Tokenized Stocks

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Disclaimers

  1. None of this is investment advice.
  2. Much of the below analysis ignores any difference between equity prices on different venues, and ignores the effects of fees.  It also ignores slippage, and generally assumes that all transactions happened at theoretical prices instead.
  3. While this does generally describe how tokenized stock trading on FTX works, it contains approximations and should not be taken as precise.
  4. In general, FTX reserves the final right to interpretation of all actions on its platform.
  5. This document may become out of date at some point and fail to reflect updated policies.
  6. FTX reserves the right to restrict usage of its tokenized stock trading as it sees fit.
  7. Users should trade tokenized stocks at their own risk.
  8. Brokerage services with respect to tokenized stocks on FTX are provided by Canco GmbH (FTX Switzerland).
  9. Tokenized Stocks, like the rest of FTX, are not being offered to US users or other prohibited jurisdictions, potentially including Iran, Afghanistan, North Korea, Hong Kong, Singapore, and/or other jurisdictions.  Users must pass sufficient KYC checks in order to trade tokenized stocks on FTX.  For more information, see here.

 

FTX Switzerland (Canco GmbH) is authorized to provide brokerage services for tokenized stock trading.

 

What are tokenized stocks?

Equities are stocks that trade on traditional regulated exchanges.  In addition to tokenized stocks, FTX may be offering tokens on ETFs, futures, currencies, or other similar products.

 

How is this trading regulated?

Canco GmbH (FTX Switzerland) is an authorized financial intermediary permitted to offer these products. All FTX users who trade tokenized stocks may also become customers of FTX Switzerland, and pass through it's KYC and compliance. Furthermore, all trading activity may be monitored for compliance by FTX Switzerland. FTX Switzerland custodies the equities at a third party brokerage firm. Canco GmbH (FTX Switzerland), instead of FTX Trading Ltd, FTX Digital Markets Ltd or other affiliates, provides the brokerage services.

In order to trade tokenized stocks on FTX, you must be at least KYC level 2.  Once you are, you can go to your tokenized stocks KYC page to submit your information to FTX Switzerland.  You must also not be a member of one of FTX's restricted jurisdictions, including the United States; FTX collects KYC documents and IP addresses from its users.  FTX does not operate in its restricted jurisdictions.

FTX and FTX Switzerland may also collect further information from prospective users, and may require passing a test in order to trade.  Further compliance measures may be used as appropriate.

Users are also encouraged to consult their personal and local situation in order to determine whether trading tokenized stocks on FTX is right for them.

 

What exactly is traded on FTX?

FTX itself lists tokens on the equities.  For instance, ftx.com/trade/TSLA/USD is a market to trade tokens on Tesla stock.

These spot tokens are backed by shares of Tesla stock custodied by FTX Switzerland.  They can be redeemed with FTX Switzerland for the underlying shares if desired.  In the future, there may be other ways to withdraw the tokens from FTX.  If you are interested in getting set up to redeem the stocks, please email support.

 

Who can trade tokenized stocks on FTX?

In order to trade tokenized stocks on FTX, you must be at least KYC level 2.

All FTX users who trade tokenized stocks must also pass through Canco GmbH's (FTX Switzerland's) KYC and compliance.  Once you are KYC 2, you can go to your settings page to submit your information to FTX Switzerland.

You cannot trade tokenized stocks on FTX from any of the banned jurisdictions, including the United States.  Note that the set of allowed jurisdictions is subject to change.

 

How do you trade tokenized stocks on FTX?

Mechanically, you trade tokenized stocks the same way you trade other spot markets.  Fees, API calls, and GUI instructions are all the same.

In order to register for tokenized stocks trading on FTX, go to https://ftx.com/tokenized-equities-kyc to submit your KYC information to and become a customer of Canco GmbH (FTX Switzerland).

Following that, you may be asked to answer some information on your trading experience.

 

How long does KYC take?

First, you must be KYC 2 on FTX.  That can take up to a day.

Then, you submit your KYC information to FTX Switzerland.  That could be quite fast, but generally takes a couple business days.  The process takes substantially longer if you submit incomplete or unclear KYC information.

Note that if you have an institutional account on FTX, KYC with FTX Switzerland will likely take at least a day or two.  Individual accounts are often faster.

 

How are corporate actions handled?

Holding tokenized stocks on FTX entitles users to dividends, etc. of the underlying stock.  FTX will pursue all reasonable actions to have the tokens on FTX reflect the corporate actions of the underlying equities, including through dividends and stock splits.  It is not anticipated that the shares will exercise their voting rights but FTX Switzerland may do so in its discretion.

For US listed products, the dividends on FTX will be paid out at 2pm HKT on ex-date.  At this time US equities are closed, and it's between after-hours and pre-open trading.

We will continue to investigate but for now dividends will be paid out gross of tax, and it will be up to each user to understand the tax consequences of any dividends they receive.

Dividends will generally be credited to your account around 2pm HKT.

In the event of an unusual circumstance we will endeavor to have a fair and reasonable resolution.

 

What hours to tokenized stocks trade on FTX?

24/7!  Note, however, that the the liquidity of the underlying assets may vary over the course of the day and week, and that might end up reflected in the liquidity of FTX's markets.

 

How do tokenized stocks interact with balances on FTX?

Tokenized stocks are spot tokens, like BTC/ETH/FTT/etc.  They can also be used as collateral for futures trading on FTX, with a collateral weight of 0.85 (total) and 0.80 (initial).

 

How do futures on tokenized stocks work?

FTX also lists futures on tokenized stocks, including tokenized futures.

Tokenized stock futures will track FTX spot markets as their index.  They will work the same as futures on other FTX products, with the following conditions:

1) In the case of an ordinary dividend, the futures will not have any adjustments

2) In the case of many other corporate actions, including stock splits, significant spinoffs, etc., futures will adjust, either by changing denominators or by turning into a future on the whole basket in the case of spinoffs.

3) FTX reserves the final right to determination.

4) Futures expire to their index (generally the FTX spot markets) over the relevant TWAP period.

 

Trading futures on tokenized stocks on FTX requires the same KYC procedure as trading tokenized stocks themselves.

Note that stocks can be highly volatile and illiquid, especially when their primary listing exchange is closed.  Please exercise your judgement and caution when trading futures on tokenized stocks.  Any risk that you take in your trades is your responsibility to manage.  You might be liquidated if futures prices change.

 

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