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Highlights
- Franklin Templeton has pioneered the sponsor fee war trend
- The firm said it will only charge 0.19% as fee for spot Ethereum ETF product
- It looks to hit the lowest charge for this product as it did with Bitcoin ETF
The spot Ethereum ETF sponsor fee war is about to start as investment asset management firm Franklin Templeton just disclosed its 19 basis points (bps) sponsor fee charges.
A 0.19% Sponsor Fee Sets Precedent For Spot Ethereum ETFs
After receiving approval from the United States Securities and Exchange Commission (SEC) on the Ethereum ETF proposed rule change, applicants were expected to also gain approval for S-1 registrations in order to commence trading. Franklin Templeton finally filed an updated version of its S-1 application recently in response to the SEC’s request that all updated S-1 filings be submitted by Friday. In Franklin Templeton’s filing, the ETH ETF issuer disclosed that it would only charge 0.19% as a sponsor fee.
Noteworthy, this fee sets a precedent for other spot Ethereum ETF issuer as they also submit their S-1 application. Franklin Templeton’s spot Bitcoin ETFs has a fee of 0.19% as well but this was after a 10 bps reduction. At the time, it made the firm the Bitcoin ETF issuer with the lowest fee amongst its competitors.
Similarly, Franklin Templeton introduced a fee waiver for the first six month after introducing its spot Bitcoin ETF in the market. It’s not yet clear if the same treatment would be given by issuers to the newly approved Ethereum ETFs.
Will Grayscale Change its 1.5% Fee Precedence?
In the case of Bitcoin ETFs, issuers like Grayscale Investments fixed what analysts regarded as an outrageous sponsor fee which its CEO Michael Sonnenshein tried to defend.
Sonnenshein justified its 1.5% sponsor fee citing the trust’s impressive 10-year track record, extensive market liquidity, and Grayscale’s specialized focus as a crypto specialist. With the slow performance of the ETF amid multiple outflows, it wasn’t long before that that the GBTC fee was scheduled for a review. In the long run, most of the spot Bitcoin ETF issuers ended up with fees around 0.19% and 0.25%.
Seeing that Franklin Templeton has set its sponsor fee at 0.19%, its counterparts including BlackRock are likely to pick a fee around this, if not exactly the same. Oftentimes, this fee intensifies the competition between the ETF issuers and may determine which issuer will dominate the market.
Meanwhile, these spot Ethereum ETF issuers are expected to go through at least two additional rounds of updates before a final decision on the listing.
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