Ripple Prime, the institutional brokerage arm acquired by Ripple in a $1.25 billion transaction, has expanded into Wall Street's leveraged ETF market by offering swap financing to fund managers. According to a Wall Street Journal report referencing Morningstar Direct data, the firm is providing the derivative instruments required to power amplified single-stock and index funds.
- Ripple Prime supplies total return swap financing to funds including the Tradr 2X Long SDNK Daily ETF.
- Morningstar Direct data shows 593 US leveraged ETFs holding over $256 billion in total assets, including 426 single-stock funds.
- Financing fees for funds like Tradr reached roughly 8% annualized on October 7, calculated at the overnight bank funding rate plus 4 percentage points.
- The expansion follows an October 6 agreement adding hedge fund manager Brevan Howard to Ripple Prime's clearing and financing platform.
Expanding into Wall Street Swap Financing
Ripple initially acquired Hidden Road for $1.25 billion before rebranding the platform as Ripple Prime. Under president Noel Kimmel, the brokerage is actively pitching swap financing to ETF issuers and institutional asset managers. The strategy positions Ripple Prime alongside nonbank financial firms such as Jane Street and Clear Street, which have expanded as traditional banks face stricter capital limits.
The target sector includes 593 US leveraged ETFs managing more than $256 billion in assets. A primary catalyst for this volume is the growth of 426 single-stock leveraged funds, a product category first approved by regulators in 2022. Similar to broader market developments in leveraged ETF fee structures and daily resets, these vehicles depend on swap contracts provided by brokerages to achieve daily leverage multiples.
Swap Costs and Counterparty Risks
Financing total return swaps generates steady fee income for prime brokerages. For instance, the Tradr 2X Long SDNK Daily ETF pays Ripple Prime a fee structured as the overnight bank funding rate plus 4 percentage points. As of October 7, that structure translated to an annualized fee of approximately 8% on the fund's net asset value.
This business push moves Ripple beyond pure digital asset settlement. On October 6, Ripple Prime announced an expanded multi-asset prime brokerage, clearing, and financing relationship with Brevan Howard. The move mirrors broader structural shifts across institutional crypto platforms, such as Evernorth completing its Armada merger ahead of its Nasdaq debut.
Why It Matters
Ripple's push into leveraged ETF financing demonstrates how digital asset firms are leveraging nonbank brokerage acquisitions to capture traditional Wall Street revenues. Capital constraint rules on legacy investment banks have created room for liquidity providers to finance high-yield derivative products. However, swap financing exposes counterparties to significant risk, as steep single-day declines in underlying equities can erode fund collateral before providers can hedge their exposure.
