What are Stock Tokens?
Stock tokens are tokens that closely track the performance of traditional financial securities, particularly shares of publicly traded companies. Stock tokens are delta-one products that are backed by physical shares. This means for a given instantaneous move in the price of the underlying asset there is expected to be an identical move in the price of the derivative.
Why trade Stock Tokens instead of shares?
Unlike traditional stocks, users can purchase fractional shares of the listed companies with stock tokens. For instance, for a Tesla share that trades at over $700 per share, stock tokens enable investors to buy a piece of the underlying share (e.g., 0.01) instead of the entire unit.
In addition, Binance does not charge a commission for stock token transactions, offering traders the opportunity to save money on fees.
Token holders will also enjoy benefits such as dividends and other economic benefits of holding the underlying stock. However, token holders are not entitled to voting rights.
How do Stock Tokens work?
Stock tokens are denominated, settled, and collateralized in BUSD; this makes the calculation of returns easier and quicker in fiat. Tokens are cash-settled, meaning there will be no physical redemption of underlying shares.
Stock tokens are created on collateral held by a third party. Therefore, each token represents a share in a publicly listed company. This way, the token’s price is pegged to the price of the underlying shares.
How are Stock Tokens regulated?
Each token is fully backed by shares held by, CM-Equity AG, a licensed and fully regulated asset management firm in Germany. CM-Equity AG entrusts the acquired shares to a third-party brokerage firm for custody. In addition, CM-Equity AG will be monitoring all trading activity for compliance.
Who can trade Stock Tokens?
Binance users who have completed Level 2 KYC, including ID and face verification, are eligible to trade stock tokens. For German users, a Level 3 KYC verification is required (proof of address, more advanced identity checks, complete risk assessment, and suitability questionnaire).
Users from Mainland China, Turkey, the U.S, and other restricted jurisdictions are prohibited from trading stock tokens.
In general, stock tokens are ideal for Binance users who may want to diversify their investment portfolio beyond cryptocurrencies — into traditional financial markets. Users who cannot acquire a stockbroker account or find the process too cumbersome can trade stock tokens to gain exposure in traditional equity markets. Additionally, stock tokens provide flexibility and improve market access to users who cannot afford to purchase fully paid-up shares.
How to trade Stock Tokens on Binance?
Go to stock tokens page, choose the token you want to trade, and click [Trade].
First and foremost, users must complete Level 2 KYC verification (Level 3 for German users) and confirm they agree to our Binance Stock Tokens Trading Service Agreement.
Next, deposit BUSD in the “fiat and spot” wallet.
Binance Stock Tokens trading interface
Users will have access to a historical price chart, an order entry panel, and an order/transaction history panel on the trading interface. Please note that RFQ prices are indicative, not guaranteed. There are no volume data or order book widgets. Only K-lines will be available.
On the order entry panel, input the order’s quantity and click Buy or Sell based on individual analysis. Next, confirm the order and verify the correct quantity.
Once the order is filled, the transaction will deduct BUSD from the spot wallet, and a TSLA/BUSD holding will be reflected in the assets tab on the trading interface. Do note that there will be no stock token wallet, and the BUSD balance displayed on the UI will reflect the user’s spot BUSD balance.
Stock tokens will be redeemed in cash only; this means users sell back their tokens to the market on Binance and receive an equivalent worth in BUSD. Furthermore, stock tokens are non-fungible. Users must buy and sell only at Binance. Tokens are not transferable to other exchanges.
Trading hours will be in harmony with the underlying exchange (NYSE/NASDAQ = 9:30 am - 4 pm EST). Outside of trading hours, there will be no price updates or orders permitted.
How are corporate actions handled?
Stock tokens are fully backed on the underlying market, and holders are the beneficiaries of the underlying stock economics. Thus, token holders will enjoy certain shareholder benefits. Holders are entitled to dividends, which will be passed on to users automatically. Other corporate actions such as stock splits are supported as well. In such a scenario, we will automatically issue tokens representing any new shares as required. All corporate actions will be notified to clients by email in advance.
However, the tokens confer no legal rights in and of themselves. Stock token holders are not entitled to legal or voting rights. Additionally, token holders are not eligible to attend the company’s AGM.
Please note that all Stock Tokens listed on Binance.com are products issued and sold by CM-Equity AG, Germany.