Deutsche Borse enjoys record turnover due to crypto ETP products
The head of Deutsche Börse's ETF segment, Stephan Kraus (pictured), is seeing the extraordinary power of the new range of cryptocurrency ETPs in full flight, with the ETC Group’s bitcoin ETP, launched last June, showing up as the most actively traded ETP in the first quarter of 2021. That product has just been joined by ETC’s Litecoin ETN, the first time litecoin has been available for trading via Xetra and Börse Frankfurt.
The ETN, which is physically backed by litecoin, has been admitted to the Regulated Market of the Frankfurt Stock Exchange and is centrally cleared via Eurex Clearing.
“We have actually been offering ETNs that track cryptocurrencies as an underlying market since the middle of last year and development has been very encouraging since then,” Kraus says.
Kraus notes that other providers have joined the offering and additional cryptocurrencies such as bitcoin cash, ether and litecoin have been added. “We see a lot of interest from issuers and investors,” Kraus says. “Volumes have been continuously growing and reached a new record of EUR3 billion in the first quarter of 2021.”
He comments that it’s been a long project, bringing cryptocurrency ETNs on to the exchange. “We had to get clearing approval so that we could offer central clearing. This helps reduce settlement and counterparty risks as the clearing house steps into the trade and acts as central counterparty (CCP) to each side of the transaction. It also reduces costs due to settlement netting.”
Central clearing is ‘appreciated’ by institutional investors, and increases the ‘attractiveness’ of the cryptocurrency products, Kraus says.
"We are a venue that caters to the demands of investors and there is strong interest from investors in getting access to the price development of cryptocurrencies,” he says. “The alternative for investors would be setting up a wallet infrastructure on an unregulated cryptocurrency platform.
“Through our ETN offering, Investors can get exposure to the price development of cryptocurrencies in a regulated market environment, with pre and post trade transparency and full market monitoring by a neutral trading surveillance office in just the same way it would be for an ETF.”
The cryptocurrency products have prospectuses, drafted and published in accordance with the European prospectus regulation, so are fully transparency with a detailed overview of the cost structure and investment risk of the products.
“As an investor, you have all the means to take an informed investment decision, as you have all the relevant information prepared for you,” Kraus says.
From monitoring the average order ticket sizes for the cryptocurrency products, the exchange estimates that institutional investors are by far the largest part of the investment group, with 80 per cent of the transaction volumes, and the remaining 20 per cent covered by retail investors. Investors are coming from all over Europe.
With the huge investor interest, Kraus confirms that the exchange is looking at expanding its offering in cryptocurrencies. “We are in discussion with other providers and there will be additional products listed over the coming weeks and months,” he says. “We align ourselves with our clearing house to assess what can be added.”