Ripple (XRP) Expands Wall Street Push With Leveraged ETF Swap Financing: Report

Ripple Enters Leveraged ETF Financing Market With Wall Street Push

Introduction

Ripple is moving deeper into Wall Street's leveraged ETF business, with its prime brokerage arm providing swap financing to funds that use derivatives to amplify bets on stocks and indexes.

Ripple's Entry into Leveraged ETF Financing

A recent Wall Street Journal report shows how the crypto company is entering a fee-heavy part of traditional finance where banks have long dominated, while tighter capital rules are creating room for nonbank firms.

Ripple's Acquisition and Expansion

Ripple entered the business last year through its $1.25 billion acquisition of Hidden Road, now known as Ripple Prime. The platform is already working with ETF providers and is seeking business from other investment managers, including hedge funds.

Leveraged ETFs and Fees

Leveraged ETFs use total return swaps and other derivative instruments in order to amplify the daily changes in individual stocks or indexes. The swap is provided by a bank or broker at a cost, and the risk is then hedged by purchasing the underlying security.

Market Impact and Risks

Morningstar Direct data quoted by the WSJ put the number of US leveraged ETFs at 593, with more than $256 billion in assets. Single-stock leveraged funds account for 426 of them, a category regulators first approved in 2022.

Ripple Prime's Success

Noel Kimmel, president of Ripple Prime, described swap financing as a "growing and meaningful part" of the business. Nonbank firms such as Jane Street and Clear Street are also gaining ground as banks face tighter limits on the amount of risk they can take.