Trading Rules – Tokenized Stocks
Guidelines and key differences between traditional stock trading and tokenized stock operations under Stove Protocol.
Core Principle
Tokenized stocks on Stove Protocol are 1:1 representations of real-world equities held by licensed custodians. They mirror the economic exposure of the underlying assets but do not confer legal ownership of shares.
All transactions—minting, redemption, and transfers—occur on-chain, governed by transparent smart contracts and verifiable custody proofs.
Trading tokenized assets implies participation in a digital financial infrastructure, not a traditional brokerage service.
Price Formation & Market Behavior
Price Discovery
Determined by centralized exchanges (NYSE, NASDAQ, etc.)
Based on oracle-fed reference prices and on-chain RFQ markets
Trading Hours
Limited to exchange market hours
24/7 global availability
Settlement
T+2 or T+1 clearing cycles
Instant on-chain settlement
Price Deviation
Single global price reference
Minor divergence due to oracle delay or liquidity
Liquidity Source
Centralized order book
RFQ takers / AMM pools / DEX aggregators
Prices of tokenized assets are aligned with real-world stocks via oracles, but temporary de-pegging may occur under market stress or oracle latency.
Mint & Redeem Rules
Minting:
Requires off-chain verification through a licensed custodian (e.g., HabitTrade).
Mint requests are processed via signed RFQ orders (EIP-712) to ensure authenticity.
Tokens are minted 1:1 against verified shares.
Redeeming:
Reverse process of minting.
Upon redemption, the equity tokens are burned on-chain.
The custodian executes the sale of the corresponding shares off-chain.
Users receive the settlement proceeds in stablecoins.
Both actions are recorded on-chain, ensuring full transparency.
The protocol itself sees zero contract-level fees; users may incur applicable network gas fees and brokerage-related costs.
Trading Conduct Rules
To maintain fairness, transparency, and regulatory neutrality, the following principles apply:
No Wash Trading or Price Manipulation — all on-chain activities are traceable and monitored.
No Unauthorized Custody Representation — users cannot claim legal stock ownership from token holdings.
Compliance with Local Laws — users are responsible for adhering to financial regulations in their jurisdictions.
Prohibition of Secondary Centralized Markets — tokenized stocks should only circulate in compliant decentralized environments or approved partners.
Transparent Fee Policy — Stove Protocol does not charge protocol-level fees. Network gas fees and brokerage costs may apply.
Dividend & Corporate Action Handling
Dividends: Distributed through the Vault System, represented as equivalent stablecoins or reinvested tokens.
Stock Splits / Mergers / Delistings: Automatically executed on-chain via the Corporate Action module.
Voting Rights: Not applicable. Tokenized assets are economic derivatives, not shareholder instruments.
Stove Protocol mirrors corporate events but does not participate in governance of the underlying companies.
Custody & Proof-of-Backing
All issued tokens correspond to real shares held by licensed custodians.
Proof-of-holdings is regularly published through verifiable reports and on-chain hashes.
Token issuance follows deterministic logic via StockTokenFactory ensuring traceability and uniqueness.
Important Disclaimers
Tokenized stocks are not securities within Stove Protocol’s model.
Participation involves DeFi and custody-related risks as described in Risk Considerations.
The Stove Foundation reserves the right to pause mint/redeem or freeze assets in case of fraud, oracle malfunction, or regulatory intervention.
By interacting with Stove Protocol, users acknowledge and accept these operational and market conditions.
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