Ripple Expands Prime Brokerage Into Leveraged ETF Financing

Update (Oct 8, 07:29 UTC): Ripple Prime has expanded its institutional brokerage operations into leveraged exchange-traded fund financing, recently backing the Tradr 2X Long SNDK Daily ETF.

Crypto company Ripple has entered the business of financing leveraged stock exchange-traded funds following its $1.25 billion acquisition of Hidden Road, according to CoinDesk and a Wall Street Journal report. Its prime brokerage division, Ripple Prime, is providing total return swaps that allow funds to gain amplified daily exposure to stocks and market indexes.

Total Return Swaps and Financing Rates

Instead of buying underlying assets directly, funds tracking leveraged equity moves enter into total return swaps with a broker. The broker provides the exposure while hedging its risk through stock purchases, collecting a financing fee in return. For instance, the Tradr 2X Long SNDK Daily ETF targeting the daily movement of Sandisk pays Ripple the overnight bank funding rate plus four percentage points, resulting in an annualized financing rate of roughly 8%.

Market Context and Capital Growth

The U.S. market currently features 593 leveraged ETFs holding over $256 billion, including 426 funds tracking individual stocks, according to Morningstar Direct data. While major banks have traditionally dominated this sector, tighter capital requirements have opened opportunities for nonbank firms like Ripple Prime, Jane Street, and Clear Street. Ripple launched its Delta One business in August to offer total return swaps tied to U.S. stocks, market indexes, and digital assets, supported by over $1 billion in regulatory net capital and a $275 million senior debt offering.

Key facts

• Ripple acquired Hidden Road for $1.25 billion to enter prime brokerage and financing services.
• Ripple Prime provides total return swaps for leveraged exchange-traded funds tracking stocks and indexes.
• The Tradr 2X Long SNDK Daily ETF pays Ripple the overnight bank funding rate plus four percentage points.
• The U.S. market contains 593 leveraged ETFs holding over $256 billion in assets.
• Ripple launched its Delta One business in August with more than $1 billion in regulatory net capital.