That puts the annualized financing rate at roughly 8% at prevailing rates, charged on the swap exposure and separate from the ETF’s management fee.
The U.S. market now has 593 leveraged ETFs holding more than $256 billion, including 426 funds tracking individual stocks, according to Morningstar Direct data.
Banks have traditionally supplied much of this financing, but tighter capital and risk requirements have created openings for nonbank firms including Ripple Prime, Jane Street and Clear Street.
Ripple launched its Delta One business in August, offering total return swaps tied to U.S. stocks, market indexes and digital assets. It said at the time the operation had more than $1 billion in regulatory net capital, and it had completed a $275 million senior debt offering to help finance further growth.
Meanwhile, the company announced an expanded agreement on Tuesday with hedge fund manager Brevan Howard, under which Ripple Prime will provide brokerage, clearing and financing services across multiple asset classes.
Leveraged ETFs reset their exposure daily, and sharp moves in individual stocks can leave financing firms exposed if a fund’s assets are insufficient to cover losses.
The business gives Ripple fee income tied to stock trading and institutional financing. As such, the company has still not disclosed how much revenue its leveraged ETF financing generates or how much of that activity uses XRP or the XRP Ledger.
