BlackRock, a global asset manager, made updates to its Bitcoin exchange-traded fund (ETF) prospectus on April 5. The update included the addition of five major Wall Street firms as new authorized participants. The new members are ABN AMRO Clearing, Citadel Securities, Citigroup Global Markets, Goldman Sachs, and UBS Securities. This information was disclosed in a document amending BlackRock’s S-1 registration statement with the Securities and Exchange Commission.
Authorized participants play a critical role in the operational mechanism of the BTC ETF. They have the ability to create and redeem shares of the ETF, which involves exchanging ETF shares for a corresponding basket of securities that reflect the ETF’s holdings, or exchanging them for cash. Previously authorized participants in the ETF include JPMorgan Securities, Jane Street Capital, Macquarie Capital, and Virtu Americas.
According to Bloomberg analyst Eric Balchunas, the addition of these new firms indicates that “big time firms now want a piece of the action and are now okay with being publicly associated with this.”
The Securities and Exchange Commission’s stance on a cash creation and redemption mechanism for Bitcoin ETFs was primarily aimed at reducing market manipulation risks associated with transactions. The cash mechanism means that new shares of a Bitcoin ETF will only be created or redeemed through cash transactions, as opposed to the traditional in-kind model where market participants handle the underlying assets directly. This approach was developed to prevent intraday price manipulation, based on initial proposals by asset managers like Hashdex. Following the SEC’s guidance, other asset managers such as BlackRock, ARK Invest, and Grayscale have incorporated this mechanism into their filings.
Bitcoin ETFs experienced a surge in trading volume in March, reaching $111 billion. However, some analysis suggests that demand for the product is cooling down. BlackRock’s IBIT continues to dominate trading volume and assets under management, followed by Grayscale’s and Fidelity’s funds. According to data from BitMEX Research, BlackRock’s IBIT assets reached $17.6 billion on April 1.