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FRM Part II · FRM Exam Part II · Tokenization and Financial Market Inefficiencies

A firm trades a security that is held across several custodians, each keeping its own ledger. Occasionally the ledgers disagree and trades fail until reconciled. Which feature of tokenized markets would most directly address this friction?

A single shared ledger is the feature that addresses this friction. When custodians each keep separate records, mismatches cause failed trades and reconciliation costs. A common synchronized record of ownership lets all parties see the same data, reducing breaks and operational risk.

  1. AA single shared ledger acting as a common source of truth for ownership recordsCorrect
  2. BHigher mandated capital ratios for custodians
  3. CLonger settlement cycles to allow more reconciliation time
  4. DGreater use of paper certificates

Explanation

Duplicate, siloed records cause reconciliation breaks and failed trades. A shared ledger provides one synchronized record of ownership, reducing reconciliation. Longer cycles or paper certificates do not remove the duplication, and capital ratios address solvency, not record mismatch.

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