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

Which feature of traditional markets does the tokenization literature identify as a cause of market fragmentation and limited asset mobility, which tokenization on a unified platform could reduce?

Traditional markets rely on separate, non-interoperable infrastructures for securities, cash and jurisdictions. This fragments liquidity and limits asset mobility, such as collateral movement. A unified programmable platform is the proposed remedy, not the cause.

  1. AUse of a single programmable ledger for all assets
  2. BSeparate, non-interoperable infrastructures for different assets and currenciesCorrect
  3. CContinuous 24/7 settlement of all trades
  4. DDirect peer-to-peer ownership without any intermediaries

Explanation

Traditional markets run separate infrastructures for securities, cash and different jurisdictions that do not interoperate, so assets and collateral are hard to move. The other options describe features of a tokenized system, not traditional frictions.

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