Jane Street Group has begun providing swaps to a swelling cohort of leveraged ETFs, amping up the competition in a niche but lucrative corner of the derivatives market.
The trading giant entered the business earlier this year and furnished about $1.2 billion notional of swaps in the second quarter to roughly 75 leveraged and inverse single-stock exchange-traded funds listed in the US, according to quarterly filings data compiled by Asym Research. Focusing on single-stock ETFs, the firm now accounts for approximately 2% for the segment. Clear Street leads the way with about 21%, while Marex Group Ltd holds around 11%.
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US leveraged ETF assets peaked above $200 billion in the second quarter, fueled in part by the growth of single-stock products. That expansion has created fresh demand for swap dealers — which typically enter bespoke derivatives contracts with ETF issuers to provide the funds’ desired leverage — and greater risk as they take on exposure tied to some of the market’s most volatile stocks.
While Jane Street’s market share is so far modest, the move emphasizes the allure of the business, with non-bank dealers that have dominated the single-stock ETFs increasingly competing with Wall Street banks. It also highlights the broader encroachment of market makers into areas traditionally served by big banks.
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