The New York Stock Exchange has completely revolutionized the traditional closing model

Author: Vaidik Mandloi

Translation: Block unicorn

Preface

Last week, the New York Stock Exchange (NYSE) announced plans to build a 24/7 blockchain-based tokenized securities trading platform. At first glance, this seems just another headline about “traditional finance adopting blockchain.” For those who have been following the cryptocurrency space over the past few years, tokenized stocks, on-chain settlement, and stablecoin financing are already familiar concepts.

However, this announcement is not about testing new technology but about challenging market sectors that rarely change.

The stock market still operates with fixed trading hours and delayed settlement mechanisms, mainly because this system has effectively managed risk for decades. Trades occur within a short time window, with clearing and settlement happening afterward. Large amounts of capital are idle between trading and settlement to absorb counterparty risk. While this system is stable, it also suffers from slow speed, high costs, and increasing disconnection from global capital flows.

The NYSE’s proposed solution directly challenges this structure by reshaping how the market handles time. An always-open trading venue, settlement times closer to execution, fewer periods with price updates but still exposed to risk—all point in the same direction.

Unlike cryptocurrency markets built under different constraints, traditional stock markets can pause trading or delay settlement. In contrast, crypto markets operate continuously—pricing, execution, and settlement happen in real-time, reflecting risk immediately rather than delaying it. While this design has its own shortcomings, it eliminates the inefficiencies caused by time-based systems still relied upon by traditional markets.

The NYSE is attempting to incorporate elements of continuous trading into a regulated environment while maintaining safeguards that ensure market stability. This article will explore how the NYSE’s actual operational model works and why it’s more than just an eye-catching headline.

Why This Is Not “Just Another Tokenization Announcement”

The focus of the NYSE’s announcement is not on stock tokenization itself. Stock tokenization has existed in various forms for years, but most attempts have failed. What makes this announcement different is who is initiating the tokenization and what level it targets.

Past attempts at tokenized stocks aimed to replicate stocks outside the core markets, such as FTX’s tokenized stocks, Securitize’s tokenized equity products, and synthetic equity products built on protocols like Mirror and Synthetix. These products trade on different venues, at different times, and rely on price data from markets that often close. As a result, they struggle to maintain continuous liquidity and are mostly used as niche access products rather than core market tools.

All these early efforts occurred outside the primary stock issuance markets. They did not change how stocks are issued, traded, or settled, nor did they alter the risk management within the actual pricing systems.

However, the NYSE is addressing this issue from within. It is not launching parallel products but adjusting trading and settlement methods within a regulated exchange. The securities themselves remain unchanged, but their trading and settlement processes will evolve over time.

The most significant part of this announcement is the decision to combine continuous trading with on-chain settlement. Either change could be implemented independently. The NYSE could extend trading hours without blockchain, or try token issuance without affecting trading hours. Ultimately, it chose to bundle both. This indicates that the NYSE’s focus is not on convenience or user experience but on how risk exposure and capital flow operate during continuous market operation.

Much of today’s market infrastructure is built to address the so-called “time gap.” When markets close, trading stops, but positions remain open. Even if prices no longer move, risk and exposure persist. To manage this, brokers and clearinghouses require collateral and safety buffers, which are locked until settlement completes. While stable, this process becomes less efficient as trading speeds up, global participation increases, and more activity occurs outside local trading hours.

Continuous operation and faster settlement can narrow this gap. Risks are addressed at inception rather than overnight or over several days. This doesn’t eliminate risk but reduces the time capital is idle just to cover time uncertainty. That’s what the NYSE is working to achieve.

This is also why stablecoin-based financing is integrated into this model.

Today, cash and securities flow through different systems, often on different schedules, causing delays and extra coordination. Using on-chain cash allows both parties to settle simultaneously without waiting for external payment systems. Coupled with continuous trading, this is crucial for a global market where information and investor activity are active 24/7. Prices can be adjusted in real-time upon news release, rather than waiting hours for the next market open. However, whether this improves market performance under stress remains uncertain—this is the real significance of these changes.

Internal Market Changes

The NYSE’s proposal has a simple yet important consequence in the back-end clearing and settlement processes. Today’s stock markets heavily rely on net settlement. Millions of trades offset each other before settlement, reducing the amount of cash and collateral needed. This system works well within a fixed trading schedule and delayed settlement but depends on the time gap to operate efficiently.

Continuous trading and faster settlement change how clearing occurs. When settlement is quicker, the opportunity to offset large volumes of trades through end-of-day netting diminishes. This reduces some efficiencies gained from batch trading. As a result, brokers, clearing members, and liquidity providers need to manage funds and risk exposure throughout the trading day, rather than relying on overnight settlement to absorb and disperse risk.

Market makers and large intermediaries will be the first to adapt. Under current models, they can hold inventories and adjust positions based on predictable settlement cycles. As settlement speeds up and trading continues, inventory turnover accelerates, and funds need to be available more quickly. Companies that have already adopted automation, real-time risk checks, and flexible liquidity management will find it easier to cope. Others will face stricter limits, as rebalancing positions or relying on overnight settlement becomes less feasible.

Short selling and securities lending face similar pressures. Borrowing stocks, locating inventory, and resolving settlement issues typically involve multiple steps and time windows. Shortening settlement deadlines compresses these steps, making delivery failures harder to delay, and lending costs and availability will adapt more rapidly to market conditions.

Most importantly, these impacts are mostly behind the scenes. Retail investors may not notice major changes at the interface, but institutions providing liquidity and managing capital positions face tighter time constraints. Some frictions are eliminated, while others become more pronounced. Errors can no longer be corrected as easily as before; systems must stay synchronized throughout the trading day, not just after the fact.

Second-Order Effects

Once markets no longer rely on time as a buffer, a different set of constraints begins to influence behavior. This is most evident in how large institutions reuse capital internally. Currently, the same balance sheet can support positions across multiple settlement cycles, as debts eventually offset over time. As settlement cycles tighten, this reuse becomes more difficult. Capital must be allocated earlier and more precisely, subtly changing internal capital allocation decisions, limiting leverage, and affecting how liquidity is priced during market volatility.

Another consequence is how volatility propagates. In batch-processing markets, risk tends to accumulate during market closures and is released at predictable times like open or close. With continuous trading and settlement, this accumulation effect diminishes. Price swings spread throughout the day, making volatility harder to predict and manage, and challenging old strategies that relied on pauses, resets, or halts.

This also impacts inter-market coordination. Today, much of the price discovery occurs outside major stock exchanges via futures, ETFs, and other proxy instruments, mainly because the underlying markets are closed. As primary markets stay open and settlement speeds increase, the importance of these alternative methods diminishes. Arbitrage opportunities will shift back to main markets, altering liquidity patterns in derivatives and reducing the need for indirect hedging tools.

Finally, this changes the role of exchanges themselves. They are no longer just order matchers but become more involved in risk coordination. This increases their responsibility during stress events and shortens the distance between trading infrastructure and risk management.

In summary, these impacts explain why, even if this move doesn’t immediately transform market appearance or sentiment, it is critically important. The effects will unfold gradually, influencing capital reuse, the spread of volatility over time, the shift of arbitrage activities to primary markets, and the management of balance sheets under tighter constraints. These are not short-term improvements or superficial upgrades but systemic reforms that reshape internal incentives. Once markets operate this way, reversing these changes will be much more difficult than adopting them.

In today’s market structure, delays and multi-layered intermediaries serve as buffers, allowing problems to surface gradually, losses to be absorbed over time, and responsibilities to be dispersed across institutions. As timelines shorten, this buffer weakens. Funds and risk decisions move closer to execution. The space to hide errors or delay consequences shrinks, making failures more immediate and easier to trace.

The NYSE is testing whether a large, regulated market can operate normally under these conditions without relying on delayed trading to manage risk. Shorter times between trading and settlement mean less room for repositioning, dispersing funds, or post-trade adjustments. This change forces issues to become apparent during regular trading, not after, exposing vulnerabilities more clearly.

That’s all for today. See you in the next article!