The crypto derivatives exchange FTX will soon offer tokenized shares of some of the world’s biggest companies—including Tesla, Apple, Amazon and Alphabet.
Its new service has been built in conjunction with the tokenization company Digital Assets AG, as well as CM-Equity, an investment firm based in Germany.
From next week, fractionalized versions of these tech stocks will be paired against Bitcoin and stablecoins, opening the stock market to a new sub-section of investors.
Fractional stocks can make gaining exposure to equities less expensive, as traders don’t need to purchase a whole share. Despite a recent stock split, Tesla is trading at $406 at the time of writing, while Amazon is worth $3,162—prices that can be offputting for retail investors.
“Both crypto trading and equities trading have been steadily attracting a wider audience with new market participants coming in,” Sam Bankman-Fried, the chief executive of FTX, was quoted by Cointelegraph as saying. “These fractional stock products reflect the reality that today’s traders are industry and sector spanning and want trading opportunities that fully match their interests and mindset.”
The new service will be subject to some restrictions, meaning that traders in the U.S. won’t be able to access these fractionalized stocks.
In a separate interview with Bloomberg, Bankman-Fried said that many investors are deterred from getting involved in stocks because existing platforms are “old and clunky”—lacking the immediacy that’s seen in cryptocurrency trades.
On Twitter, the CEO confirmed that those who hold tokenized shares will also be entitled to dividends of the underlying stock it represents.
In a Q&A page on its website, the exchange added: “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.”
Interested investors will need to complete enhanced Know Your Customer checks in order to be eligible to trade tokenized equities.
A turbulent time
The idea of splitting shares into smaller chunks so they are more affordable for everyday investors isn’t new. Back in September, MESE.io launched a microequity stock exchange designed to allow poor and unbanked people invest very small amounts in selected stocks.
Like FTX, MESE.io initially focused on offering seven top tech firms to begin with. At the time, the managing director of the International Blockchain Monetary Reserve, Sinjin David Jung, said of MESE.io:
“It isn’t about fractionalizing the current system, it is about creating new financial opportunities that work at the level of emerging markets where even a single dollar matters.”
FTX’s announcement comes as volatility returns to the global stock markets. Indices around the world suffered painful sell-offs this week as several countries confirmed that new coronavirus infections have reached record highs once again. Germany and France also announced that they would go back into lockdown at the beginning of November. In London, the FTSE 100 index hit a six-month low.