Jane Street, the trading firm where FTX’s Sam Bankman-Fried honed his trading skills, has positioned itself as the favoured broker-dealer for proposed exchange-traded funds (ETFs) directly investing in Bitcoin. Notably, Fidelity and WisdomTree designated Jane Street Capital as their “authorized participant,” responsible for managing cash flows in and out of ETFs. BlackRock, in its amended prospectus filed with the Securities and Exchange Commission (SEC), also named Jane Street and JPMorgan Securities as authorized participants for its proposed spot-Bitcoin fund, pending regulatory approval. Valkyrie disclosed engaging Jane Street Capital and Cantor Fitzgerald & Co. for the same role in its filing.
Authorized participants, or broker-dealers, play a crucial role in the creation and redemption of ETF shares and facilitate cash transfers to and from the fund’s administrator. While obtaining authorized-participant agreements is generally routine for ETF issuers, concerns were raised in the industry about potential challenges for Bitcoin funds due to the novelty of cryptocurrencies as an asset class, according to Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.
Notably, not every firm filing an amended prospectus on Friday specified its chosen broker-dealer for this role.
Nate Geraci, president of The ETF Store, emphasized the significance of lining up authorized participants, noting, “Lining up APs won’t exactly be a layup for every prospective issuer, so this was an important step.” He further highlighted that, based on available information, BlackRock appears to be the first issuer to meet the SEC’s requirements for potential inclusion in the initial wave of spot-Bitcoin ETF approvals.
In terms of fees and pricing, Invesco, in its amended prospectus, stated its intention to waive the 0.59% fee on the first $5 billion of assets for the first six months of its Invesco Galaxy Bitcoin ETF listing. Fidelity, with the lowest fee among those disclosed so far, listed its fee as 0.39%, according to Balchunas.
Bitcoin’s robust performance in 2023, with a gain of over 150%, has been fueled by optimism surrounding the potential approval of a direct Bitcoin ETF by the SEC. The regulatory authority faces a January 10 deadline to decide on the application for a spot Bitcoin ETF submitted by Cathie Wood’s ARK Investment Management LLC and 21Shares.
