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Is decentralized always better? How market structure affects trading costs for tokenized assets

Author

Listed:
  • Aspris, Angelo
  • Dyhrberg, Anne Haubo
  • Foley, Sean
  • Krekel, William
  • Putnins, Talis J.

Abstract

Decentralization in financial markets operates at multiple layers, encompassing both the asset level, through tokenization, and the infrastructure level, via novel trading protocols such as Automated Market Makers (AMMs). This paper critically examines these twin dimensions of decentralization, focusing on the introduction of tokenized equities and the adoption of AMM mechanisms in securities market design. We find that the first tokenized equities struggle to gain adoption, resulting in poor liquidity (high price impact) and substantial price dislocations from the underlying shares. In contrast, we show that AMMs can significantly reduce transaction costs, particularly for large size trades in actively traded assets, using both matching and simulation mechanisms between centralized exchanges and AMMs. Our results suggest that while not all decentralized innovations face an easy path to adoption, some have significant potential for application to traditional asset classes.

Suggested Citation

  • Aspris, Angelo & Dyhrberg, Anne Haubo & Foley, Sean & Krekel, William & Putnins, Talis J., 2026. "Is decentralized always better? How market structure affects trading costs for tokenized assets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:intfin:v:109:y:2026:i:c:s1042443126000181
    DOI: 10.1016/j.intfin.2026.102302
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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