Monday, 5 February 2024

US Top Brokerage Firm Stalls On Bitcoin Spot ETF Engagement – Here’s Why

by Rose White

US Top Brokerage Firm Stalls On Bitcoin Spot ETF Engagement – Here’s Why

LPL Financial, the largest independent broker-dealer in the United States, is delaying its involvement in the Bitcoin spot ETF market as it awaits the result of an assessment of the novel exchange-traded products (ETPs) performance. This development was revealed by the company’s chief of wealth management solutions, Robb Pettman, in an interview published by Bloomberg on January 3.

According to Pettman, LPL, which currently manages over $1 trillion in capital, has commissioned an assessment into Bitcoin spot ETFs as they weigh the potential addition of this emerging asset class to the catalog of offers for their customers. 

Pettman, who is leading the investigation, has stated it will last for 3 months, during which LPL will simply study how these ETFs perform in the securities market. Based on these performances, LPL will decide on which of the funds will be adopted on its platform or perhaps extend the assessment period. 

However, Grayscale’s GBTC is currently available to LPL customers as it was originally converted from a trust structure. This represents the only Bitcoin spot ETF offering by the broker-dealer, as other ETFs are subject to the ongoing assessment.

A key factor in this assessment will be the amount of assets the ETFs are able to accumulate as stated by Robb Pettman. The FPL executive expressed that the company is weary of onboarding ETPs, which attract little investment and shutdown, throwing investors into losses. 

Pettman said to Bloomberg:

That can be a very negative experience for the investor for the financial adviser. It’s also incredibly costly for a firm like ours operationally to help to facilitate that,

Thus, it is important that LPL is

“mindful of the product that you’re placing on the platform and make sure that they are durable over time, that there is a good investment thesis. That’s ultimately the position that we normally come from when evaluating these,” he added. 

The Next Hurdle 

Following the approval of the Bitcoin spot ETFs by the SEC, the sponsors of these ETPs are now confronted with the herculean task of convincing traditional investment and brokerage institutions on the safety and profitability of these funds.

Similar to LPL, the majority of these companies will be accessing the assets under management by these ETFs as well as their general market performance. currently, BlackRock’s IBIT and Fidelity’s FBTC’ which boast net inflows of over $3 billion and $2 billion, respectively, are best-placed candidates to draw any form of attention from these big financial players. 

In general, sponsors of various Bitcoin spot ETFs continue to remain intentional about attracting more investments as evidenced by the incentivizing low trading fees. For instance, issuers have now placed ETF promotions on famous digital platforms, such as Google Search and YouTube, with reports indicating an extension to Facebook and Instagram soon.