Spot Bitcoin ETF hopefuls named the firms behind share creation

BlackRock, Fidelity, Valkyrie and Invesco filed amended registration statements on December 29, 2023 that identified financial firms prepared to create and redeem shares of their proposed spot bitcoin exchange-traded products. The disclosures moved the applications beyond broad product designs and toward the operational arrangements required for a possible launch.

The filings did not constitute Securities and Exchange Commission approval. Each prospectus remained preliminary, and the securities could not be sold until the relevant registration statement became effective. Exchanges also still needed approval for the rule changes permitting the products to list.

What changed on December 29 was narrower but institutionally important: several applicants showed that broker-dealers and market-making firms were willing to connect bitcoin-backed trusts to the conventional securities clearing system.

The proposed intermediaries

BlackRock’s amended iShares Bitcoin Trust prospectus named Jane Street Capital and JP Morgan Securities as authorized participants. Fidelity’s filing stated that Jane Street and JP Morgan Securities had each executed an authorized-participant agreement for the Fidelity Wise Origin Bitcoin Fund.

Valkyrie disclosed that it had engaged Jane Street and Cantor Fitzgerald for its proposed fund. Invesco’s filing said the Invesco Galaxy Bitcoin ETF had entered into agreements with JP Morgan Securities and Virtu Americas.

Authorized participants are not ordinary fund investors. They are eligible to transact directly with an exchange-traded product in large blocks called baskets, supplying assets or cash for newly created shares and returning shares for redemption. Other investors generally buy and sell individual shares through brokers in the secondary market.

That creation-and-redemption channel is intended to support liquidity and arbitrage between a fund’s market price and the value of its underlying assets. It does not guarantee that an authorized participant will submit orders, that shares will always trade at net asset value or that a liquid market will develop.

The filings described a cash model

BlackRock’s December 29 prospectus said authorized participants would deliver only cash when creating shares and receive only cash when redeeming them. It expressly stated that those firms would not purchase, hold, deliver or receive bitcoin as part of that process. The trust, rather than the authorized participant, would select a third party to provide or receive bitcoin.

Fidelity similarly described cash subscriptions and redemptions, with the sponsor arranging purchases or sales of the bitcoin represented by each basket. Invesco said creations and redemptions would initially occur in cash, while leaving open a possible in-kind model if an exchange later obtained the necessary regulatory approval.

This distinction mattered because the authorized participants could perform their securities-market role without taking direct custody of bitcoin. It also meant the trusts or their execution agents would bear responsibility for converting creation cash into bitcoin and selling bitcoin for redemptions, introducing execution costs and potential differences between transaction prices and the benchmarks used to calculate net asset value.

Preliminary competition became visible

The filings also exposed early differences in proposed pricing. Fidelity specified an annual sponsor fee of 0.39% of net assets. Valkyrie listed an annual rate of 0.80% against its bitcoin holdings. Invesco proposed a 0.59% annual fee and said it intended to waive that fee on the first $5 billion of trust assets for six months after listing.

Those were December 29 preliminary terms, not a permanent comparison. BlackRock’s filing still left its sponsor-fee percentage blank, and any applicant could amend its prospectus before effectiveness. The disclosures nevertheless showed issuers preparing to compete on both market infrastructure and cost.

What remained unresolved

Nothing filed on December 29 established that the SEC had decided to permit spot bitcoin products, that every applicant would be approved simultaneously or that investor demand would reach any particular level. The central verified conclusion was operational: multiple issuers had identified major securities firms prepared to handle basket creation and redemption if regulatory authorization followed.

Later context

On January 10, 2024, the SEC approved exchange-rule changes permitting multiple spot bitcoin exchange-traded products to list and trade. That later decision confirms the importance of the December 29 preparations, but it was not knowable as an outcome when the amended prospectuses were filed.