Ripple expands into Wall Street leveraged ETF financing through Ripple Prime, partnering with hedge fund Brevan Howard to capture swap financing fees.
Ecosystem ·
Ripple is deepening its presence in traditional finance by offering swap financing through Ripple Prime, its prime brokerage division, to funds managing leveraged exchange-traded products. The move follows the company's $1.25 billion acquisition of Hidden Road, rebranded as Ripple Prime, which entered this business last year. In October, Ripple Prime expanded its services to hedge fund Brevan Howard, adding to a growing client roster that includes ETF providers and other investment managers.
Leveraged ETFs now hold more than $256 billion in assets across 593 US products, many of which rely on derivative instruments to amplify daily market moves. Swap financing—where providers charge fees to offset the cost of enabling these leveraged positions—generates substantial revenue; one example cited shows fees of roughly 8% annualized on a single-stock leveraged fund's assets. As traditional banks face tighter capital constraints, nonbank operators like Ripple are capturing a larger share of this fee-heavy market.
The business carries structural risks for providers, who must hedge exposure to sharp single-day declines that could wipe out fund equity. How Ripple will manage these hedging obligations as its leveraged ETF portfolio scales, and whether regulatory scrutiny of the leveraged ETF market itself will constrain growth, remain unclear.