Secondary Market Liquidity for Security Tokens: Current State and Outlook

Secondary market liquidity — the ability for security token holders to buy and sell their positions without significant price impact or delay — remains the defining challenge and the most important growth vector for the tokenized securities market. Average daily trading volume across all security token ATS platforms reached approximately $12 million in Q1 2026, representing a 340% increase from 2023 but still a fraction of the $500 billion daily volume in U.S. equity markets. However, structural catalysts are converging: the STO market grew from $5.6 billion in 2024 issuance to $6.66 billion in 2025, the broader RWA on-chain market reached $19.4 billion in early 2026 (peaking at $35 billion in November 2025), and the NYSE announced plans in early 2026 to build a 24/7 tokenized securities trading platform powered by stablecoin-based funding. The tZERO-North Capital “Agora” ATS connector (January 2026) represents the first step toward ATS-to-ATS interoperability that could significantly improve cross-platform liquidity. Understanding the structural factors that drive and constrain liquidity is essential for issuers selecting offering structures, investors evaluating token purchases, and platforms building trading infrastructure.

Current Liquidity Metrics

Security token liquidity varies dramatically by asset class, offering type, and listing venue. The following data reflects Q1 2026 trading conditions across registered ATS platforms as reported in FINRA ATS transparency data.

By asset class. Real estate tokens account for 38% of all ATS trading volume, followed by fund tokens (25%), corporate equity tokens (20%), and debt tokens (17%). Real estate tokens benefit from familiar valuation frameworks and income distributions that attract recurring investor attention.

By offering type. Reg A+ tokens trade at 3-5x the average daily volume of Reg D tokens. The unrestricted nature of Reg A+ tokens — no Rule 144 holding period, open to non-accredited investors — creates a dramatically larger eligible buyer pool that directly translates to trading activity.

By venue. tZERO handles approximately 40% of total security token trading volume, Securitize Markets handles 35%, and INX handles 15%. The remaining 10% is distributed across smaller ATS platforms. See our ATS platform comparison for detailed venue analysis.

Structural Factors Constraining Liquidity

Regulatory Transfer Restrictions

The single largest constraint on security token liquidity is the regulatory limitation on who can buy and sell. For Reg D 506(c) tokens — the most common offering structure — only verified accredited investors can purchase tokens on the secondary market. This restricts the eligible buyer pool to approximately 24.3 million U.S. households (18% of the total), versus the entire adult population for publicly traded equities.

Additionally, Rule 144 imposes a one-year holding period for tokens issued by non-reporting companies. During this period, tokens cannot be resold at all, regardless of price movements. This lock-up removes supply from the market during the period when speculative interest is typically highest.

Fragmented Liquidity Across Venues

With 47 registered ATS platforms filing Form ATS-N, security token liquidity is spread thinly across multiple venues. Most individual tokens list on only one or two platforms, meaning there is no opportunity for cross-venue arbitrage or consolidated order books. Unlike equity markets, where the National Market System links orders across all venues, no equivalent consolidation mechanism exists for security tokens.

Limited Market-Making Infrastructure

Professional market making — the provision of continuous two-sided quotes that enables immediate execution — is underdeveloped in security token markets. Only 12 firms actively make markets in security tokens, compared to 400+ firms in traditional equities. The economics are challenging: wide spreads generate revenue, but low volume means market makers carry inventory risk without the ability to hedge positions efficiently.

Investor Education and Access

Many potential security token investors are unfamiliar with ATS platforms, digital wallet management, and the custody infrastructure required to hold tokens. The friction of onboarding to a new trading platform — KYC verification, wallet setup, funding — represents a meaningful barrier compared to purchasing traditional securities through established brokerage accounts.

Liquidity Enhancement Mechanisms

Issuer-Sponsored Liquidity Programs

Some token issuers allocate a portion of offering proceeds to liquidity reserves that support secondary market trading. These reserves fund market-making arrangements, providing the capital that professional market makers need to maintain continuous quotes. Typical liquidity reserve allocations range from 2-5% of total offering proceeds.

ATS Platform Incentive Programs

tZERO and Securitize both operate market maker incentive programs that reduce or eliminate trading fees for firms providing continuous liquidity. These programs have measurably tightened bid-ask spreads for participating tokens — from an average of 3.5% without incentive programs to 1.8% with active market maker participation.

Cross-Platform Token Portability

Interoperability standards like ERC-1400 and ERC-3643 enable tokens to be transferred between platforms without requiring reissuance, allowing investors to move their holdings to whichever ATS offers the best execution. This portability, enforced through compliance-embedded smart contracts and coordinated transfer agent records, reduces platform lock-in and concentrates liquidity on the most active venues.

Reg A+ as a Liquidity Strategy

Issuers increasingly view Reg A+ qualification as a liquidity strategy rather than just a capital-raising mechanism. By qualifying tokens under Reg A+ Tier 2, issuers gain access to the full retail investor base and eliminate Rule 144 restrictions, resulting in 3-5x higher trading volumes. The 3-9 month SEC qualification timeline and ongoing reporting obligations represent meaningful costs, but the liquidity benefits often justify the investment. For a detailed comparison of Reg D vs. Reg A+ from a liquidity perspective, see our analysis.

Measuring Liquidity Quality

Beyond raw trading volume, several metrics provide a more complete picture of security token liquidity quality:

Turnover ratio. The percentage of total token supply that trades within a given period. Security tokens average 0.8% monthly turnover, compared to 15-20% for S&P 500 stocks. Higher turnover indicates a more active secondary market.

Order book depth. The total dollar value of resting orders within a defined price range. For the most actively traded security tokens, order book depth within 5% of the mid-price averages $50,000-$200,000 — sufficient for retail-sized orders but inadequate for institutional block trades.

Price impact. The percentage price change caused by executing a given order size. A $25,000 market order for a typical security token moves the price 1.5-3.0%, versus less than 0.01% for large-cap equities.

Fill rate. The percentage of limit orders that execute within a defined time period. Security token limit orders placed at the current bid or ask fill within one business day approximately 65% of the time, compared to near-100% for liquid equities.

Liquidity Outlook

Several structural developments suggest meaningful liquidity improvement over the next 2-3 years. The SEC’s Crypto Task Force has identified secondary market infrastructure as a priority, potentially leading to regulatory changes that expand the eligible investor base for restricted tokens. Institutional entry — including bank and asset manager participation facilitated by clearer custody and SAB 121 guidance — will bring established trading desks and market-making operations to the security token market. Broker-dealer integration of security token trading into existing platforms will reduce onboarding friction. And the continued maturation of clearing and settlement infrastructure — including T+0 atomic settlement — provides structural advantages that should attract capital once liquidity reaches critical mass.

Regulatory Barriers to Liquidity

Several regulatory factors constrain secondary market liquidity for security tokens:

Rule 144 holding periods. Tokens issued under Reg D are restricted securities subject to 6-month (reporting issuers) or 12-month (non-reporting issuers) holding periods. During these periods, tokens cannot be resold, removing supply from the secondary market and concentrating liquidity windows around holding period expirations.

Accredited investor restrictions. Reg D 506(c) tokens can generally only be traded among accredited investors, limiting the pool of potential buyers to approximately 24.3 million U.S. households. This restriction is the single largest liquidity constraint for security tokens, as it excludes over 80% of the population from participating in secondary trading.

FINRA reporting requirements. Trade reporting obligations under FINRA rules add compliance overhead to each transaction, though this overhead is minimal for automated systems. The more significant impact is the data transparency requirement, which can affect trading strategies for institutional participants who prefer anonymity.

SAB 121 custody constraints. By restricting bank participation in crypto custody, SAB 121 limits the institutional infrastructure available for security token custody and settlement, indirectly constraining the institutional trading volume that would improve liquidity.

Addressing these barriers is central to the SEC Crypto Task Force’s mandate. Potential regulatory changes — including modified holding period requirements, expanded investor eligibility for Reg A+ tokens, and SAB 121 reform — could significantly improve secondary market liquidity over the next several years.

Liquidity Catalysts: 2025-2026 Developments

Several specific developments are converging to improve secondary market liquidity for security tokens:

ATS-to-ATS Connectivity

The January 2026 launch of Agora by tZERO and North Capital — the first ATS-to-ATS connector for tokenized securities — directly addresses liquidity fragmentation by enabling tokens listed on one ATS to be traded through the other. If Agora succeeds, similar connectors between other ATS platforms could create a network of interconnected venues that approximates the consolidated order book model of the National Market System for equities. Cross-platform liquidity aggregation would reduce bid-ask spreads by concentrating order flow and enabling cross-venue arbitrage.

Extended Trading Hours

tZERO’s December 2025 expansion to near-24/7 trading (23.5 hours per day, 12:05 AM to 11:35 PM ET) represents the first extended-hours trading for security tokens on a registered ATS. Extended hours increase the time available for liquidity-generating transactions, particularly benefiting international investors in different time zones who previously could not trade during U.S. business hours. The NYSE’s early 2026 announcement of plans to build a 24/7 tokenized securities trading platform powered by stablecoin-based funding signals that extended-hours trading may become the industry standard.

Institutional Infrastructure Maturation

BlackRock’s BUIDL fund reaching $1.87 billion AUM by early 2026 (45% of the $7.4 billion tokenized treasuries market) has attracted institutional trading desks and market makers to the security token space. Securitize’s $4 billion+ in total tokenized AUM — spanning partnerships with Apollo, Hamilton Lane, KKR, VanEck, Morgan Stanley, and ARK Invest — provides the institutional-grade product pipeline that professional market makers require to justify infrastructure investment. The broader STO market’s growth from $5.6 billion in 2024 to $6.66 billion in 2025 continues to expand the universe of tokens available for secondary trading.

DTC Integration

The December 11, 2025 SEC no-action letter allowing the DTC to operate tokenization services on permissionless blockchains — with a pilot planned for H1 2026 and public launch in H2 2026 — could be the single most significant liquidity catalyst. Integration with DTCC infrastructure would enable security tokens to be held in existing brokerage accounts (through DTC participant arrangements), dramatically reducing the onboarding friction that currently limits the secondary market buyer pool. If investors can trade security tokens through the same brokerage accounts they use for equities and bonds, the eligible buyer base expands from current ATS-onboarded investors (approximately 500,000 across all platforms) to the 100+ million U.S. brokerage account holders.

GENIUS Act Stablecoin Framework

The GENIUS Act, advancing through Congress in early 2026, would establish a federal framework for stablecoins that could enhance security token liquidity by standardizing the payment leg of token trades. Currently, settlement across platforms requires platform-specific payment arrangements. A federally regulated stablecoin framework would enable standardized DvP (delivery versus payment) settlement using compliant stablecoins, reducing settlement risk and facilitating cross-platform trading.

Crypto Task Force Policy Guidance

The SEC’s Crypto Task Force — through its six roundtables and policy guidance releases — has identified secondary market infrastructure as a priority area. Potential regulatory developments including modified Rule 144 holding period requirements for reporting issuers, expanded investor eligibility for certain tokenized securities, and clarified custody frameworks could each contribute to improved liquidity conditions. The Task Force’s 2025 broker-dealer custody relief guidance — clarifying that broker-dealers may hold crypto and tokenized assets subject to prescribed requirements — removes one barrier to institutional participation in secondary markets.

For current trading volume data, see our ATS market activity tracker. For transfer agent processes that affect settlement speed and therefore liquidity, see our guide. For the SEC’s market structure framework, see SEC Division of Trading and Markets. For FINRA’s ATS transparency data, see FINRA ATS Data.