08 May

Three Asian-based companies have collaborated to introduce Hong Kong's inaugural ETF liquidity fund, valued at approximately HK$1 billion (equivalent to about $128 million), as per a statement released on Wednesday.

LD Capital, Antalpha Ventures, and quant trading firm Highblock have partnered to provide the market-making service. Their objective with the liquidity fund is to enhance market participation for Hong Kong's crypto ETFs, facilitating smoother trading and more effective capital flow within the local ETF market, according to the statement.

How ETF Liquidity Funds Facilitate Easy Crypto Trading

ETF liquidity funds play a vital role in enhancing trading ease for specific ETFs by acting as market makers. These funds collect investor capital and utilize it to actively trade shares of targeted ETFs. This continuous buying and selling activity helps maintain a smoother market for the respective ETF, allowing investors to enter or exit their positions more seamlessly without significant price fluctuations.

Examples of crypto ETF liquidity funds include B2Broker, Flow Traders, and Virtu Financial. Among US Bitcoin ETF issuers, Jane Street has emerged as a preferred choice for authorized participants. This indicates that companies seeking to launch Bitcoin ETFs in the US often list Jane Street as a key participant.

These funds facilitate the creation and redemption of ETF shares and ensure market liquidity through continuous market-making services.

The launch of the liquidity fund coincides with Hong Kong's efforts to establish itself as a prominent hub for digital assets. Recently, the Securities and Futures Commission (SFC) approved a series of cryptocurrency ETFs from various fund managers, with some ETFs commencing trading on April 30.

The new crypto ETFs have shown a strong start, amassing $230 million in assets under management (AUM) within their first week. China Asset Management (China AMC) leads the way, with its Bitcoin ETF attracting $116 million and its Ethereum ETF pulling in $19 million.

Several factors could drive increased demand for the city's new ETFs. Significant capital from Chinese wealth residing in Hong Kong could serve as a major catalyst. Additionally, participation from Asia-Pacific crypto exchanges and market makers may further stimulate trading activity. 

May 2024, Cryptoniteuae

* The email will not be published on the website.