Katherine Ross

Potential ETF issuers are in a race to the finish line — if the Securities and Exchange Commission approves the ETFs, of course.&nbsp;



On Monday, most of the prospective funds filed updated S-1s with the SEC. While the S-1s aren’t indicative of approval and aren’t even the final step in the ETF process for these firms, they give a glimpse into who’s involved in the funds and what fees they plan to charge.&nbsp;



A <a href="https://blockworks.co/news/planned-bitcoin-etf-updates">detail seen as important as the race hits the home stretch</a> are authorized participants. An authorized participant is able to both create and redeem shares of an ETF, which can then be exchanged for either a basket of securities reflecting the holdings of the ETF or for cash.&nbsp;



On Friday, the stock exchanges tapped by the potential bitcoin ETFs — Cboe, Nasdaq and NYSE — <a href="https://blockworks.co/news/11-firms-waiting-on-bitcoin-etf-decision">filed updated 19b-4s on behalf of the proposals</a>. The updates come as industry watchers look ahead to Jan. 10: the SEC’s deadline to make a decision on the proposed ETF by Ark 21Shares.



At the end of December, a number of the final bitcoin ETF hopefuls named APs in amended disclosure filings. <a href="https://blockworks.co/news/where-bitcoin-etf-proposals-stand">However the most recent amendments</a> give a fuller picture of who plans to be involved with these ETFs if they launch.



Read more: <a href="https://blockworks.co/news/bitcoin-etf-lowest-fees-battle">Bitcoin ETF planned fees revealed: BlackRock goes low, Grayscale stays high</a>



<a href="https://blockworks.co/news/valkyrie-blackrock-authorized-participants">Jane Street was named either initially</a> or in the amended filing by every single potential issuer. Even Hashdex, which hasn’t filed an amendment yet, will tap Jane Street as an AP, a person familiar with Hashdex’s filing told Blockworks.&nbsp;



The company declined to comment.&nbsp;



There are 11 proposals to launch funds once the SEC signs off — if the agency chooses to give them a green light. That includes Hashdex, BlackRock, Ark 21Shares, Invesco Galaxy, Bitwise, VanEck, Valkyrie, Fidelity, Franklin Templeton, Grayscale and WisdomTree.



The world’s largest asset manager, <a href="https://blockworks.co/news/blackrock-names-jane-street-jpmorgan-in-proposed-bitcoin-etf">BlackRock, named JPMorgan Securities</a>, Virtu Americas and Macquarie Capital as APs outside of Jane Street. Ark 21Shares also named Virtu and Macquarie.



Grayscale said Macquarie — obviously another popular AP among the bunch — will act as an AP alongside Virtu, Jane Street and ABN AMRO. Bitwise, WisdomTree named three: Virtu, Macquarie and Jane Street.



VanEck also tapped Virtu and ABN AMRO.&nbsp;



Invesco, which previously disclosed JPMorgan Securities and Virtu, named Jane Street and Marex in its newest amendment. Fidelity follows in similar steps with four APs, though it named Macquarie instead of Marex.



Valkyrie’s APs remained unchanged in its newest amendment, with the firm only disclosing Jane Street and Cantor Fitzgerald. Franklin Templeton also only named two — though Monday’s amendment was the first time the firm disclosed APs. It listed Virtu alongside Jane Street.



Ben Strack contributed reporting.



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bitcoin etf

Jane Street named as authorized participant by all 11 bitcoin ETF hopefuls

Ben Strack

BlackRock disclosed significant new information Friday as part of its proposed spot bitcoin ETF: the identities of its intended authorized participants.&nbsp;



The asset management giant plans to tap JPMorgan Securities and Jane Street as authorized participants, a Friday <a href="https://www.sec.gov/Archives/edgar/data/1980994/000143774923035559/bit20231227_s1a.htm">filing</a> notes, should the Securities and Exchange Commission grant approval for their proposed fund.



Authorized participants, or APs, are entities allowed to create and redeem shares of an <a href="https://blockworks.co/tag/etfs">ETF</a>. These organizations can either exchange ETF shares for a corresponding basket of securities that reflects the ETF’s holdings, or exchange them for cash.



ETF watchers such as Bloomberg Intelligence analysts James Seyffart and Eric Balchunas have been closely eyeing new S-1s to see who taps which firms as APs. The disclosure is seen as one of the final steps before the SEC can make its decision.



Balchunas said in a research note this week that the SEC was ready to approve spot bitcoin ETF proposals that commit to cash-only creations and redemptions and have signed agreements with authorized participants.&nbsp;



Read more: <a href="https://blockworks.co/news/analysts-weigh-potential-bitcoin-etf-approval">As bitcoin ETF saga hits possible homestretch, here’s what to watch for</a>



Both Balchunas and Seyffart believe that there’s a 90% chance the SEC allows some firms to launch a spot bitcoin ETF in early January. The regulatory agency has a Jan. 10 deadline to make a decision on a proposal by Ark Invest and 21Shares, and could rule on similar plans by others by that date.



Ark and 21Shares, as well as VanEck, refiled their S-1s on Thursday and Friday, respectively. However neither firm has named any APs. Firms don’t have to name APs until they file the effective prospectus.&nbsp;



“Essentially meaning they can go live. [It’s] in there that an AP/underwriter would theoretically have to be named (along with fees and other details),” Seyffart <a href="https://twitter.com/JSeyff/status/1740799741938819270">said</a> in a post on X.



Grayscale Investments was set to work with authorized participants Jane Street and Virtu Financial if its Grayscale Bitcoin Trust (<a href="https://blockworks.co/tag/gbtc">GBTC</a>) was allowed to convert to an ETF — a June 2022 <a href="https://www.bloomberg.com/news/articles/2022-06-27/grayscale-bitcoin-trust-lines-up-jane-street-virtu-in-etf-bid">report</a> by Bloomberg that a Grayscale spokesperson confirmed at the time.&nbsp;



The firm did not name these companies as authorized participants in its latest S-3 filing, and a Grayscale representative did not comment further.



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BlackRock names Jane Street, JPMorgan as authorized participants for its proposed bitcoin ETF

Casey Wagner

<div id="highlights-block_61938817815df" class="highlights">
 <ul>
 <li>ETFs provide a bridge between the digital asset space and traditional finance</li>
 <li>For institutions, cash-settled derivatives, “are safer from an asset security standpoint because the underlying can’t be hacked”, says Jane Street’s Thomas Uhm</li>
 </ul>
 
</div>



<a href="https://cms.blockworks.co/events/das-london/" target="_blank" rel="noreferrer noopener">Digital Asset Summit 2021, London</a> — At Jane Street, Thomas Uhm is excited about the digital asset industry’s potential for growth, and the recently launched bitcoin futures exchange-traded funds (ETF) in the United States are just the beginning.&nbsp;



These products mark the start of a very significant bridge between traditional finance and the digital asset space, Uhm, who is a member of Jane Street’s global crypto institutional sales and trading team, said Tuesday.&nbsp;



“ETFs are a very, very useful gateway between these two worlds,” Uhm said during a keynote discussion at Blockworks’ Digital Asset Summit in London.&nbsp;



Abhishek Jain, head of international ETF trading at DRW, agreed. From a regulatory perspective, especially, the approval of bitcoin futures ETFs in the US marks the beginning of an important era for crypto and traditional finance.&nbsp;



“From a regulatory point of view, I think that the ETF is quite impactful,” Jain said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The regulators have finally broken the seal [for digital assets], this is the first real step in that direction, it certainly cannot be the last step.”&nbsp;</blockquote>



The <a href="https://cms.blockworks.co/proshares-bitcoin-futures-based-etf-to-begin-trading-tuesday/" target="_blank" rel="noreferrer noopener">ProShares Bitcoin Strategy Fund</a> and the <a href="https://cms.blockworks.co/valkyries-btf-trades-10m-in-first-5-minutes/" target="_blank" rel="noreferrer noopener">Valkyrie Bitcoin Strategy</a> ETF, both bitcoin futures-based, began trading in October, eight years after the first crypto ETF application was filed with the SEC in 2013. The products are not perfect, Jain and Uhm admitted, but they offer a way for a new wave of investors to enter the digital asset market.&nbsp;



There are members of both the crypto and the traditional financial world that are critical of the futures-based structure. The nature of the fund means that there is often a tracking error in the price, and rolling futures contracts comes with additional costs for investors, Uhm acknowledged.&nbsp;



“But, I think it is maybe useful to take a step back and think about why certain investors, especially institutions, might care about or find comfort in the fact that these products are back by regulated futures,” Uhm said. “Because these are cash-settled derivatives, they are safer from an asset security standpoint because the underlying can’t be hacked.”&nbsp;



<h3 class="wp-block-heading">Why bitcoin futures?</h3>



It’s not surprising that the US Securities and Exchange commission approved a futures-based fund before a spot product, both speakers agreed.&nbsp;



“Regulators would like an additional layer of oversight,” Jain said. “In the case of a futures-backed ETF, they have CFTC and the <a href="https://www.sec.gov/rules/sro.shtml" target="_blank" rel="noreferrer noopener">CME SRO</a>s who provide that additional layer of oversight, which they don’t have yet for the physical bitcoin ETF space.”



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="600" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg" alt="" class="wp-image-11226" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=600 600w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/IW5_3936.jpg?w=80 80w" sizes="auto, (max-width: 600px) 100vw, 600px" /><figcaption> Abhishek Jain, DRW; Source: Ian Walton for Blockworks</figcaption></figure></div>



Institutional players will continue to interact with the space, and continuing to have these conversations on a public stage is what is going to advance both industries, Uhm said.&nbsp;



“ETFs help institutions overcome the philosophical barrier of holding these assets,” Uhm said. “By the way, at Jane Street, we have these conversations with traditional players more or less constantly. Our hope is that we can add a little bit of value into the overall discussion if we’re a little bit more public about our interactions with the crypto space.”



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Abhishek Jain

Jane Street: Digital Assets is a Growing Industry for Us, We Are Excited About it

<div id="highlights-block_60c26c75db333" class="highlights">
 <ul>
 <li>After graduating from Harvard with a degree in computer science, Harrison wasn’t sure what would come next</li>
 <li>Harrison interned at Jane Street before starting as a trader on the American depositary receipts desk</li>
 </ul>
 
</div>



FTX.US president and former Jane Street software developer Brett Harrison straddles two worlds.&nbsp;



“What I discovered about myself at Jane Street was that I was able to pull together the business side and the technology side,” said Harrison. “I was the translator between these two areas and I helped the business really understand what it is they want from technology.”&nbsp;



After graduating from Harvard with a degree in computer science, Harrison didn&#8217;t know what would come next. 



“I wasn&#8217;t exactly sure what I wanted to do with computer science, I thought maybe I would become a professor or a teacher of some kind, maybe work for a big tech firm,” said Harrison. “But I had a number of friends, either my major or similar majors, who had done internships at different kinds of proprietary trading firms or hedge funds, and particularly a couple that had worked at Jane Street.”&nbsp;



Harrison interned at Jane Street before receiving a full time offer. He started on the American depositary receipts desk as a trader.&nbsp;



“It was an incredibly exciting place to be, just learning from all these amazingly smart people who are really the forerunners, they&#8217;re the experts in their field,” said Harrison.&nbsp;



<h3 class="wp-block-heading">Drawn toward technology</h3>



The business side was fast-paced and exciting, but Harrison found himself drawn to the technology.&nbsp;



“Even though I was a trader, I found myself very attracted to all of the different technology projects that were happening,” he said. “I really wanted to use my computer science background.”&nbsp;



Harrison decided to get more involved with different initiatives on the tech side, from improving the user interface and the automated trading systems to rewriting spreadsheets. He decided shortly after to move into a firm-wide technology and management role.&nbsp;



“My role became the person that would walk around all the different desks and ask people ‘what are you guys working on? What are you excited about? How can I help you?,’” said Harrison. “I would ask them what features they wanted, and I found that different desks often wanted the same things.&nbsp;



It became Harrison’s practice to gather different teams in a room together to work out different solutions that could benefit everyone.&nbsp;



<h3 class="wp-block-heading">The animal rights angle</h3>



It was while working with Jane Street that Harrison first became interested in digital assets. He and Sam Bankman-Fried, CEO of FTX, became close when they overlapped at Jane Street.&nbsp;



“It’s funny, a mutual acquaintance told us that we were actually very involved in donating to the same animal rights charity, so that kind of brought us together,” said Harrison. “We were both vegans and we bonded over that.”



Bankman-Fried left Jane Street to work with the Center for Effective Altruism in 2017.&nbsp;



“I was still at Jane Street after he left, but it was around the same time that Jane Street began getting into cryptocurrencies as well,” said Harrison. “I got to see some of the beginnings of real institutional involvement in that digital asset space.”



Harrison was intrigued, but skeptical.&nbsp;



“I remember back then thinking that this was the Wild West, just in terms of the exchanges and what their technology looked like, and managing different wallets and trying to move currencies around between different exchanges,” said Harrison. “It was really the beginning of something, and it had a very, very long way to go. But it was a really exciting space.”



Harrison stayed with Jane Street for about eight years before he moved to Chicago with his family. He worked for Headlands Technologies for about a year as a software developer. Most recently, Harrison served as the head of semi-systematic technology at Citadel Securities. Crypto was something he had always kept an eye on, but it wasn’t until very recently that he became professionally involved in the space.&nbsp;



<h3 class="wp-block-heading">A surprise move</h3>



“Sam and I had kept in touch a lot over the years and he had kept me up to date on a lot of the interesting things that were going on in his world, to say the least,” said Harrison. “We were just texting and he said ‘by the way, we have a lot of exciting things happening here at FTX, and we would love to have you.’” 



In a move that surprised even himself, Harrison started as the president of FTX.US in May 2021. 



“I hadn&#8217;t thought very much about the digital asset industry in terms of something that I could work in,” said Harrison. “But then, after discussing a possible career with FTX in the US, I started to really dig deep into what&#8217;s going on with this industry and thought ‘wow, this is just an opportunity of a lifetime to be a part of this amazing movement.’”&nbsp;



In his short time at FTX.US, Harrison has found that technology, finance and crypto aren’t really all that different after all.&nbsp;



“You know, as a software engineer, in many ways an exchange, writing an exchange, running an exchange is completely different from any of the work that I had done before. It occupies a completely different place in the financial ecosystem,” said Harrison. “But there&#8217;s a lot of overlap in terms of the need to build something that scales and is built in a financially responsible way.”



His traditional finance and technology peers were excited about the career change, Harrison said.&nbsp;



“We’ve really reached the point now where crypto is no longer something that traditional finance firms can ignore,” he said. “Many different firms have discussed getting into crypto, imminently. It&#8217;s probably the most talked about asset in the financial space right now.”&nbsp;



Have your own <a href="https://cms.blockworks.co/?s=Gone+Crypto">Gone Crypto</a> story to tell? Email us at news@blockworks.co.

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