TP ICAP To Extend Trades on Crypto Equity Instruments to US ETFs

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

The inter-dealer broker and digital asset business of Germany-listed market infrastructure provider BTCetc, an exchange-traded Bitcoin physical crypto product for the ETC Group, trades on an explicit basis against the CME Group’s Bitcoin future in the form of an EFP (physical exchange). Liquidity was provided by Crypto ETP market makers, such as DRW, Flow Traders and Jane Street.

“Institutional demand continues to grow exponentially in this area and this partnership will help us expand our capabilities to serve our clients,” Max Minton, head of digital assets for Asia Pacific at Goldman Sachs, said in a statement.

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

“Since starting the digital asset business, we have focused on providing our clients with access to the cryptocurrency market through familiar products and familiar providers,” he added. “They are the building blocks of a healthy liquid ecosystem that we see in the other asset classes at TP ICAP which is why it is so encouraging to see these products bundled together.”

Simon Forster, TP ICAP

He went on to say that the trade and profile of the companies involved speak of increased institutional interest in cryptocurrencies and the maturation of the asset class.

TP ICAP is based in the United Kingdom but also has a footprint in the United States and Asia. Forrester said the company wants to offer the same range of products in all three regions.

“US ETFs are definitely going to grow, so it’s really important that we serve clients on these products on the ground in the US,” Forrester added.

The US Securities and Exchange Commission has approved bitcoin futures ETFs but not spot ETFs. TP ICAP found that there was a significant increase in CME bitcoin futures volumes following the SEC approvals of U.S. bitcoin-based ETFs in October 2021.

Forster anticipates that the next focal point for the crypto market will be OTC derivatives such as non-deliverable futures, OTC options and total return swaps which are very important in other asset classes that TP ICAP deals with.

“We do a lot of work internally on these products to ensure we can meet our regulatory obligations such as reporting,” he added. “We’re really focused on doing what we can in our role as a broker to help put this framework in place for clients.”

By the end of this year, Forrester said the digital asset business would like to trade listed derivatives, equity instruments, and OTC derivatives in all three regions and successfully launch a wholesale cryptocurrency trading platform.

In June 2021, TP ICAP announced that it intends to launch wholesale Online marketplace for crypto-asset trading. The launch is subject to registration with the UK’s Financial Conduct Authority, which is still pending, under the Money Laundering, Terrorist Financing and Funds Transfer 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.

“We expect to announce more keepers who will support our network and would also like to make progress on some of the coding initiatives where we play a role,” Forrester said.

Duncan Trenholme, TP ICAP

Duncan Trenholme, co-head of digital assets at TP ICAP, told Markets Media that in the spot crypto market, the company’s clients would like the assets to remain with the custodian and use a familiar execution firm. The coding process is also expected to grow.

He added, “Investment banks are looking to put credit instruments on Ethereum, there is talk of central bank digital currencies, and there are high-level precious metals projects from investment banks.”

ETC . group

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

BTCE was the first cryptocurrency ETP approved by the German regulator and the world’s first centrally traded crypto exchange product when it was listed on Deutsche Börse Xetra in June 2020 according to ETC Group. The fund also became the primary product of Europe’s first crypto futures contracts in place of derivatives on the German Stock Exchange.

ETC Group said BTCE had an order book turnover of more than $8 billion in the first 11 months of last year and was the most traded product on the Bitcoin exchange from Xetra to date. BTCE was also the second most traded product within the entire ETF and ETP segment of Deutsche Börse as its assets grew from $89 million in October 2020 to over $1.7 billion in November 2021.

Bradley Duke, ETC Group

Bradley Duke, CEO of ETC Group, an issuer of institutional grade digital asset-backed securities, told Markets Media that the TP ICAP trade shows a certain level of maturity for the cryptocurrency markets.

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

He went on to say that BTCE is increasingly seen as a proxy for Bitcoin in a regulated instrument because tracking errors are small, spreads are narrow and they are highly liquid. Duke expects the 2022 trend of increased institutional participation in the cryptocurrency markets to continue, especially since bitcoin is seen as an inflation hedge alongside gold.

“In 2021, the market capitalization of cryptocurrencies increased from less than $1 trillion to more than $3 trillion in market capitalization,” he added. “At the beginning of 2021, bitcoin was 70% of the total market capitalization and is now 40%. Bitcoin hasn’t lost any of its luster but there have been a lot of new coins.”

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

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

Staking allows cryptocurrency holders to earn rewards for holding certain coins through a staking pool. Cryptocurrencies that allow for storage use a consensus mechanism to ensure that all transactions are verified and secured on the blockchain and staking allows an investor to become a part of the process.

Duke said that ETC Group also expects to launch more UCITS ETFs, based on indices or yield-linked. In November 2021, ETG Group, along with HANetf, launched the first substantive ETF, the Digital Asset and Shares Blockchain 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 the core crypto markets and blockchain technology that underpins this high-growth industry, and they can do so through ETC products like BTCE and now through KOIN. ETF. This is similar to the way that investors access gold by investing in the commodity directly and also through gold miners or gold mine ETFs.”

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