Ripple charges a 2x Sandisk ETF about 8% a year to finance its leverage
Ripple is financing leveraged stock ETFs through its prime brokerage arm, a business it entered by buying Hidden Road for $1.25 billion. The fees come with exposure to client funds that one large move in a single stock can wipe out.
The Investor · Invest desk
What happened
- US investors hold more than $256 billion in 593 leveraged ETFs, and 426 of those funds track a single stock, according to Morningstar Direct.
- Ripple said its Delta One swaps operation had more than $1 billion in regulatory net capital when it launched in August.
- Ripple expanded a deal on Tuesday to provide Brevan Howard with brokerage, clearing and financing across multiple asset classes.
Why it matters
- What it costs cost If a 2x fund ran its whole exposure through the swap, 8% on twice its assets would cost holders about 16% of assets a year, gross, on top of the management fee.
- Who's exposed exposure Ripple collects a steady spread, but its losses would arrive all at once, in a single session large enough to push a client fund's assets below what it owes.
- Who's exposed exposure Holders of a 2x Sandisk fund now rely on a crypto company's prime broker to pay out their leveraged gains under the swap.
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A fund promising twice Nvidia's daily return can sign a total return swap instead of buying twice its assets in Nvidia shares. The broker on the other side supplies the exposure, typically hedges by buying the stock, and collects a financing fee [4]. Leveraged ETFs reset daily [13], so a 2x fund starts each session with exposure equal to twice its assets. A 50% fall in the underlying within that session takes the fund to zero [16]. Past that point the fund owes more than it holds. A broker's share hedge offsets the market move, but it does nothing about a client that cannot pay [13].
The Sandisk fund's rate, as the Journal reported it, is the overnight bank funding rate plus four points, about 8% at prevailing rates [5][6]. The benchmark supplies roughly 4 of those points and Ripple's markup the other 4 [15], before whatever Ripple pays to fund the shares it holds as a hedge. Earning back the $1.25 billion Hidden Road price [2] from that markup alone in one year would take about $31 billion of swap exposure [18]. In 2x funds that is about $15.6 billion of assets [19], roughly 6% of the $256 billion held by every US leveraged ETF combined [10][20]. Hidden Road also clears and finances bonds, currencies and digital assets as well as stocks [3]. This one product does not have to repay the deal by itself.
Part of the growth is borrowed. Ripple completed a $275 million senior debt offering to help pay for it [8]. The Delta One business it launched in August offers swaps on US stocks, indexes and digital assets [12]. Ripple has not disclosed how much revenue the leveraged ETF financing generates, or how much of the activity uses XRP or the XRP Ledger [14].
Ripple could keep the ETF book small, an add-on to the clearing and financing operation it bought with Hidden Road [3]. The book could also grow toward the size the purchase price implies, and growth here runs through single stocks: 426 of the 593 US leveraged funds, about 72%, track one company [10][17]. A third outcome is XRP Ledger use large enough to make this a crypto business in more than its ownership [14].
I think the second path is the likely one. A four-point markup matters against $1.25 billion only at scale, and in this market scale means more single-stock gap exposure set against the same capital. The counter-thesis is that this is ordinary nonbank prime brokerage: banks pulled back under tighter capital and risk requirements, and Jane Street and Clear Street moved into the same work [11]. A disclosure that the ETF swap book is small relative to Ripple's net capital would show the risk side of this view to be overstated.
What to watch
- Any Ripple disclosure of leveraged ETF financing revenue or swap book size, set against the more than $1 billion of net capital Delta One reported.
- A one-session move of 50% or more in a stock underlying a 2x fund Ripple finances, the first test of whether fund assets cover the swap.
- Whether Ripple routes any of the ETF financing activity through XRP or the XRP Ledger.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
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Reality
- Evidence55
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Claim ledger
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- [1]
Ripple's prime brokerage division, Ripple Prime, is supplying financing for funds that let investors multiply the daily moves of individual stocks and market indexes, according to a Wall Street Journal report on Wednesday.
- [2]
Ripple entered the business through its $1.25 billion acquisition of Hidden Road, a multi-asset prime brokerage firm, in October 2025.
- [3]
The Hidden Road deal gave Ripple an established operation that clears trades, finances investment positions and handles transactions across stocks, bonds, currencies and digital assets.
- [4]
A fund promising twice the daily return of Nvidia can enter a total return swap instead of buying twice its assets in Nvidia shares; a broker provides the exposure, typically hedging its own risk through stock purchases or other trades, while collecting a financing fee from the fund.
- [5]
The Tradr 2X Long SNDK Daily ETF, which targets twice the daily movement of Sandisk, pays Ripple the overnight bank funding rate plus four percentage points.
- [6]
The annualized financing rate is roughly 8% at prevailing rates, charged on the swap exposure and separate from the ETF's management fee.
- [7]
Ripple said at the Delta One launch that the operation had more than $1 billion in regulatory net capital.
- [8]
Ripple completed a $275 million senior debt offering to help finance further growth.
- [9]
Ripple 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.
- [10]
The US market has 593 leveraged ETFs holding more than $256 billion, including 426 funds tracking individual stocks.
- [11]
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.
- [12]
Ripple launched its Delta One business in August, offering total return swaps tied to US stocks, market indexes and digital assets.
- [13]
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.
- [14]
Ripple has not disclosed how much revenue its leveraged ETF financing generates or how much of that activity uses XRP or the XRP Ledger.
- [15]
At a roughly 8% all-in rate with a four-point spread, the overnight bank funding rate contributes about 4 percentage points.
- [16]
A 2x daily fund starting a session with exposure of twice its assets loses all of its assets if the underlying falls 50% within that session; any further loss is owed to the swap provider by a fund with nothing left.
- [17]
Single-stock funds are about 72% of US leveraged ETFs by count.
- [18]
Recovering the $1.25 billion Hidden Road price from a four-point spread alone in one year would require about $31 billion of swap exposure.
- [19]
$31 billion of swap exposure in 2x funds corresponds to about $15.6 billion of fund assets.
- [20]
$15.6 billion is roughly 6% of the more than $256 billion held by US leveraged ETFs.
- [21]
If a 2x fund ran its entire exposure through the swap, an 8% rate on twice its assets would equal about 16% of fund assets a year, gross, separate from the management fee.
Sources
3 independent publishers whose own reporting we read for this story.
- coindesk.comRipple is earning fees financing leveraged stock bets, a business long run by banks
1 article · October 7, 2026
- crypto.newsRipple challenges Wall Street banks with leveraged ETF financing push
1 article · October 8, 2026
- cryptobriefing.comRipple now earns prime brokerage fees after $1.25 billion Hidden Road deal
1 article · October 8, 2026
Topics and entities
Topics
- Total return swaps
- Leveraged and single-stock ETFs
Entities
- The Wall Street Journal
- Jane Street
- XRP Ledger
- Tradr 2X Long SNDK Daily ETF
- SanDisk
- RLUSD
- Ripple Prime
- Ripple