Tokenized equities and the 24/7 market problem

Continuous equity trading is usually presented as a straightforward improvement, and for a participant it mostly is. The complication is that a great deal of financial machinery quietly depends on the market closing.

The closing auction is not merely the end of the day. It is a scheduled moment of concentrated liquidity that produces a reference price with enough volume behind it to be worth trusting. Options settle against it. Index funds rebalance into it. Margin is struck from it. Net asset values are computed on it. Remove the bell and every one of those needs a new answer, none of which is obvious.

The naive substitute — a spot price sampled at an arbitrary instant — is manipulable in exactly the way the closing auction was designed to resist. Thin-book venues have learned this repeatedly and expensively.

Our current approach in Onchain Stocks is a time-weighted reference series computed over rolling windows, with window length scaled to the instrument’s observed depth. Liquid names get short windows and stay responsive; thin names get long ones and become expensive to move. It is not elegant, and it does not fully replace what the auction provided, because an auction concentrates liquidity in a way that a rolling average cannot manufacture.

We suspect the eventual answer involves scheduled onchain auction events — periodic concentrations of liquidity in a market that is otherwise continuous. Which would mean arriving, after some effort, at something structurally close to a closing bell. We are not entirely comfortable with that conclusion and are still testing against it.