Token & Quote Pricing
How is the price of an Ondo tokenized stock determined?
Ondo tokenized stocks are designed to be total-return trackers of their underlying securities. This means they reflect both price movements and reinvested dividends and/or interest, giving users exposure to the economic performance of the real stock over time—not just the price appreciation.
When you hold an Ondo tokenized stock, you receive similar economic exposure to what you would get if you owned the actual underlying stock and invested its dividends (net of any applicable withholding taxes) into the stock. This ensures that the tokenized asset mirrors the total return of the real-world asset.
For more on how corporate actions are handled, read more here.
Can you give me an example?
Let’s take a sample stock, ACME, and its corresponding Ondo tokenized stock, ACMEon. At launch, assume they both start at $100 and that you buy one ACMEon token. If the ACME stock goes up by $5 to $105, the ACMEon stock should as well. Similarly, if the stock goes back down $100, the same should be true for the token.
Now let’s assume—again, for a simplified example—that ACME stock declares a dividend of $10 per share. On the ex-dividend date (i.e. the cutoff date on or after which whoever acquires the stock is no longer eligible to receive the dividend), we update the price of the token to account for the fact that we’re going to receive that dividend (net of applicable withholding taxes) and invest that money to purchase additional shares of ACME.
In this case, for ease of math let’s assume the withholding tax was 50%. This means that we’d receive $10*(1-50%) = $5 from the dividend. If we assume the price of ACME at the time was still $100, that means we would buy $5/$100 = 0.05 additional shares of ACME stock. This means that, from now on (at least until the next dividend or corporate action), a single ACMEon token now actually represents the economics of 1.05 shares of ACME stock. Therefore, if the price of ACME stock was to go from $100 to $110 again, the price of the token would go from 1.05 shares * $100/share = $105 to 1.05 * $110/share = $115.50.
You can see this “shares per token” for each asset in our web app at app.ondo.finance (opens in a new tab)
[Technical Note: In the above example we assumed that the price of ACME stock on the ex-dividend date remained at $100. In reality if the dividend was $5, in most cases the price of the ACME stock would drop by $5 to $95 on the ex-dividend date. (Why? Think about it: say someone offered you a stock for $100 today that would pay you $5 tomorrow. If they suddenly told you that you weren’t going to get the $5 tomorrow, wouldn’t you want to pay $5 less?). So the price of the stock is now $95. In our approach, our system effectively takes the $5 we expect from the dividend and buys $5/$95 = 0.05263158 more shares, so the number of shares backing each token goes from 1 to 1.05263158, so the price of the token remains at 1.05263158 * $95 = $100. In other words, the price of the token remains the same, but the number of shares represented by each token increases.]
What is a total-return tracker?
Total-return trackers are financial assets that are designed to mirror the complete performance of an index or asset. Unlike price return trackers, which only capture an asset’s market value changes, total return trackers account for all cash flows—dividends, interest, or capital gains distributions—assuming these are reinvested to compound returns (net of applicable withholding taxes).
A total-return tracker includes:
- Price movements – gains or losses in the asset’s market value
- Income distributions – such as dividends (for stocks) or interest (for bonds)
- Corporate actions – like mergers that may affect total value (learn more)
By capturing both capital gains and income, total-return trackers offer a more comprehensive reflection of an asset’s performance than price-only trackers.
When I am actually buying or selling an Ondo tokenized stock, the price seems to be slightly different from the ‘main’ price listed? Why?
Answering this requires a little bit more explanation about how our Global Markets platform works.
Let’s say you’re trying to buy Ondo tokenized Tesla, or TSLAon. What you really want to know is “at what price will you (the Global Markets platform) sell me (the investor) X number of TSLAon tokens?” As you might imagine, the answer to that is tied to a very similar question: “at what price will someone (in the traditional market) sell us X number of TSLA shares?”
So when you indicate that you want to be X number of TSLAon tokens, we provide you a quote for a price that’s guaranteed for some amount of time (currently about 30 seconds). To generate that quote, the Global Markets platform automatically looks at existing inventory, market conditions, and other factors and then does a little bit of (proprietary) math to figure out what an appropriate quote price should be for that order.
Even on a traditional exchange, the bid price (i.e. what someone is willing to pay to buy a stock) is always lower than the ask price (i.e. what someone is asking to receive if they sell a stock). [Why? If someone was willing to pay $100 (the bid) for a stock and someone else was willing to sell for $99 (the ask), then the deal would have already been done!]. The “main” price that is displayed is usually just the midpoint of those two numbers at the top of the order book.
For Ondo tokenized stocks, the “main” price you see for a given token is our estimate of that midpoint price of the underlying stock multiplied by the number of shares per token, whereas the ‘quote price’ you receive when actually buying or selling tokens is the result of our proprietary method for determining at what price we can guarantee we can buy or sell that number of tokens. Those numbers should never be too different from one another, but that’s where the discrepancy comes from.
(Please note that if you are buying an Ondo tokenized stock on the secondary market, whomever you are transacting with may be charging their own fees. You are also responsible for your own gas costs.)
How do you determine the spread to apply on a quote?
This is based upon a number of factors, including quote size, target profit, and several other proprietary considerations.