TP ICAP to Expand Crypto Equity Trading to US ETFs

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TP ICAP’s digital asset business aims to expand its crypto asset equity trading to US exchange-traded funds after completing the first such transaction with Goldman Sachs this month.

The digital asset business of the interdealer broker and market infrastructure provider traded BTCetc, ETC Group’s physical exchange-traded crypto product, on an outright basis for CME Group’s Bitcoin futures in the form of an EFP (exchange for physical). Crypto ETP market makers DRW, Flow Traders and Jane Street provided liquidity.

Max Minton, APAC Head of Digital Assets at Goldman Sachs, said in a statement, “Institutional demand continues to grow significantly in this area and this partnership will help us expand our capabilities to serve our clients.”

Simon Forster, co-head of digital assets at TP ICAP, told Markets Media that ETPs and futures are very well understood by the company, whether they refer to bitcoin, gold, a other asset or an index.

“Since beginning the digital asset business, we have been focused on providing our customers with access to the crypto market through familiar products and with familiar vendors,” he added. “They are the building blocks of a healthy liquid ecosystem that we see in other asset classes at TP ICAP, which is why it’s so encouraging to see these products coming together.”

Simon Forster, ICAP TP

He continued that the trade and profile of the companies involved speak to increased institutional interest in crypto and the maturing of the asset class.

TP ICAP is based in the UK but also has a presence in the US and Asia. Forster said the company wanted to offer the same product line in all three regions.

“US crypto ETFs will undoubtedly grow, so it’s very important that we serve clients on these products on the ground in the US,” Forster added.

The United States Securities and Exchange Commission has approved bitcoin futures ETFs, but not bitcoin spot ETFs. TP ICAP found that there was a significant increase in CME bitcoin futures volumes following the SEC’s approval of the first US ETFs based on bitcoin futures in October 2021.

Forster expects the next focal point of the crypto market to be OTC derivatives such as non-deliverable futures, OTC options and total return swaps which are very important in other classes of assets managed by TP ICAP.

“We are doing a lot of work internally around these products to make sure we can meet our regulatory obligations such as reporting,” he added. “We’re really focused on doing what we can in our intermediary role to help put that framework in place for customers.”

By the end of this year, Forster said the digital asset industry would like to trade listed derivatives, equity instruments and OTC derivatives in the three regions and have successfully launched a trading platform. big for spot crypto trading.

In June 2021, TP ICAP announced plans to launch wholesale electronic marketplace for the trading of spot crypto assets. The launch is subject to registration with the UK’s Financial Conduct Authority, which is still pending, under anti-money laundering, terrorist financing and transfer of funds regulations. Fidelity Digital Assets and Zodia Custody will provide custody of digital assets to ensure clients have a separate and interoperable model for execution and settlement.

Forster said, “We plan to announce more custodians that will support our network and we would also like to make progress around some of the tokenization initiatives where we play a role.”

Duncan Trenholme, ICAP TP

Duncan Trenholme, co-head of digital assets at TP ICAP, told Markets Media that in the spot crypto market, the firm’s clients would want the assets to stay with the custodian and use a familiar execution firm. He also expects tokenization to grow.

“Investment banks are looking to put credit instruments on Ethereum, central bank digital currencies are being discussed, and there are high-profile precious metals projects from investment banks,” a- he added.

ETC Group

Forster said clients want to use ETC Group’s BTCE fund as a proxy for bitcoin because it is the most liquid crypto ETP on a regulated exchange in Europe.

BTCE was the first crypto ETP approved by the German regulator and the world’s first cleared crypto exchange-traded product when it listed on Deutsche Börse Xetra in June 2020 according to ETC Group. The fund also became the underlying product for Europe’s first crypto futures on the German exchange’s derivatives market.

ETC Group said BTCE had more than $8 billion in revenue in the first 11 months of last year and was Xetra’s most-traded exchange-traded product to date. BTCE was also the second most traded product within the entire ETF and ETP segment on Deutsche Börse, with its assets growing from $89 million in October 2020 to over $1.7 billion in November 2021.

Bradley Duke, ETC Group

Bradley Duke, managing director of ETC Group, an issuer of institutional-grade digital asset-backed securities, told Markets Media that the TP ICAP transaction shows a certain level of maturity in the crypto markets.

“The arrival of large institutional players like TP ICAP and the facilitation of transactions of this nature means that a level of sophistication has developed around a new asset class,” Duke added. “It’s an interesting cross between the old world and the new.”

He went on to say that BTCE is increasingly seen as a proxy for bitcoin in a regulated instrument because tracking error is low, spreads are tight, and it is highly liquid. Duke expects 2022 to continue the trend of increasing institutional involvement in crypto markets, especially as bitcoin is seen as an inflation hedge alongside gold.

“In 2021, the cryptocurrency market capitalization has grown from less than $1 trillion to over $3 trillion in market capitalization,” he added. “At the start of 2021, Bitcoin was 70% of the total market capitalization and now it is 40%. Bitcoin hasn’t lost any of its shine, but there have been so many new coins.

In December 2021, ETC Group announced the listing of five new exchange-traded cryptocurrencies on Deutsche Börse – Polkadot, Solana, Stellar, Tezos and Cardano.

“This year, the focus will be more on yield and there are some good products that involve staking,” he added. “It involves an adjustment to the risk profile, so there should be a reflection in the rewards offered.”

Staking allows crypto owners to earn rewards for holding certain currencies through a staking pool. Cryptocurrencies that allow staking use a consensus mechanism to ensure that all transactions are verified and secure on the blockchain and staking allows an investor’s participation to be part of this process.

Duke said ETC Group also plans to launch more UCITS, index-based or performance-linked ETFs. In November 2021, ETG Group, in collaboration with HANetf, launched its first thematic ETF, a Digital Assets & Blockchain Equity UCITS ETF on the London Stock Exchange – the KOIN ETF.

Hector McNeil, co-founder and co-CEO of HANetf, said in a statement: “Investors are increasingly looking for alternative ways to access both underlying crypto markets and technology. of the blockchain that underpin this high growth industry, and they can do this both through ETC products such as BTCE and now through KOIN ETF.This is similar to how investors access gold by investing directly in the commodity and also through gold mining companies or gold miner ETFs.

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