However, a different picture emerges when the underlying market is closed. Leading up to midnight on Thursday, September 3, Robinhood’s AMC token went from $2.55 to as high as $23.16, which is nine times the $2.54 AMC had closed on NYSE seven hours earlier, before coming back down to $3.26 within the same hour. Volume through the pool during the hour was $10.5 million.
Wrapped tokens such as Robinhood’s AMC are often structured as claims against offshore issuers, which collateralize the tokens with the underlying shares. Theoretically, if the issuer ensures that underlying stock positions and the claims are matched 1:1, the price should align, but in practice, the two instruments are traded separately and can thus diverge. Arbitrageurs, such as high-frequency trading firms and market-making desks, step in to keep markets in line, lock in arbitrage profits, and…
