The final use case we’re going to examine is after hours trading.
After hours trading refers to the case of trading stocks during unconventional hours.
In the days before global connectivity, stock trading was limited to daytime hours, from 9:30 AM to 4 PM EST.
This artificial restraint perpetuated into the Digital Age.
So what’s stopping us from enabling after hours trading today? The problem is a lack of liquidity.
With a lack of liquidity comes an increase of volatility, implying an increase of risk.
As the SEC aims to reduce risk for investors, the options for after hours trading are limited to limit orders.
These types of orders are not guaranteed to execute, only going through if some stock value is above some minimum or below some max, depending on the type of order.
The solution? Tokenize the stocks.
Put the marketplace on the blockchain instead.
We can tokenize the stocks by asking a broker to underwrite the stock token.
The contract will say, “Anyone who owns this stock token can come to me, the broker, to exchange the token for the physical corresponding stock.” This tie between the token and real world assets will provide the tokens with tangible value, and the global properties of a blockchain will allow that stock to be traded around the world, unrestrained by social constructs.
The most important part of the blockchain, however, is the accessibility.
Any broker can tap into this market, allowing for the trustless pooling of these stock tokens across the board.
By coordinating between these untrusting parties on a globally accessible platform, the liquidity problem will have been solved in a way that’s unfeasible for centralized solutions.