In the race to offer exchange-traded funds directly linked to Bitcoin, Jane Street has become the go-to broker-dealer for numerous issuers. FTX’s Sam Bankman-Fried honed his trading skills at Jane Street, elevating the firm’s status as the top choice for those proposing ETFs aiming to invest in Bitcoin.
Companies like Fidelity, WisdomTree, and BlackRock have designated Jane Street Capital as their “authorized participant,” responsible for managing cash flows into and out of these ETFs. BlackRock, in addition to Jane Street, has also tapped JPMorgan Securities as potential authorized participants, contingent upon regulatory approval for their proposed spot-Bitcoin fund, as disclosed in a recent Securities and Exchange Commission filing. Valkyrie, in their own submission, has similarly engaged Jane Street Capital and Cantor Fitzgerald & Co. for the same pivotal role.
The role of broker-dealers as authorized participants entails overseeing the creation and redemption of shares within the fund, along with cash transfers involving the fund’s administrator. Despite the usual ease of securing authorized-participant agreements for ETFs, concerns had surfaced within the industry regarding the potential difficulties faced by Bitcoin funds due to the novelty of cryptocurrencies, noted Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.
While some firms detailed their broker-dealer choices in their amended prospectuses, not every issuer disclosed their intended broker-dealer for the role.
Nate Geraci, president of The ETF Store, emphasized the significance of aligning authorized participants, stating, “Lining up APs won’t exactly be a layup for every prospective issuer, so this was an important step.” He also noted BlackRock’s advancement in meeting SEC requirements, potentially positioning it as the primary issuer in the initial wave of spot-Bitcoin ETF approvals.
Insights from Amended Prospectuses
Ahead of the SEC’s deadline, Invesco revealed intentions to waive the 0.59% fee on the first $5 billion of assets for its Invesco Galaxy Bitcoin ETF during its initial six months of listing. Fidelity, on the other hand, disclosed a 0.39% fee, the lowest among filings so far, according to Balchunas.
Bitcoin’s surge, exceeding 150% in 2023, has been fueled by optimism surrounding the anticipated SEC approval of an ETF directly linked to the prominent cryptocurrency. This contrasts with existing products tied to Bitcoin futures. The SEC’s decision deadline on Cathie Wood’s ARK Investment Management LLC and 21Shares’ application for a spot Bitcoin ETF is set for January 10.
