Leverage Shares entrusts the pricing and quoting of its ETPs on European Exchanges to specialized third-party market makers, some of which we hire, like BNP Paribas and Virtu Financial, and others simply arbitragers and liquidity providers. When an ETP, such as 3TSL, is based on a US asset but presented on a European exchange in GBP, it’s crucial to understand how its intrinsic value is translated from its original USD form.

Here’s where the expertise of these market makers becomes paramount. They have privileged access to interbank foreign exchange (FX) rates, which are the ultracompetitive rates at which the world’s largest banks exchange money. Leveraging these rates, the market makers can efficiently price and quote the ETPs in multiple currencies, ensuring accuracy and minimal cost for investors trading on exchange.

This becomes particularly important when you contrast it with the common FX experience of individual investors. If an investor, for instance, with a GBP local currency account, decides to trade the USD variant of an ETP through their broker, they might face significant added fees. Some brokers can charge a hefty FX fee of as much as 1.5% on top of the trade value (up to 100x more expensive than interbank rates)! With the market makers’ utilization of the interbank FX rates, such exorbitant charges can be bypassed when trading Leverage Shares ETPs in the investors’ local currency. (Please reach out to your broker for more details about their fee structure).

Lastly, arbitrageurs monitor the market to ensure that there’s a tight alignment between the ETP’s quoted price and its intrinsic value based on the underlying asset and interbank FX rate. In essence, by collaborating with, and taking full advantage of Europe’s large network of market makers, arbitrageurs, and liquidity providers, Leverage Shares ensures that investors access competitive, fair, and transparent prices with minimal added costs.