Morgan Stanley launches cheapest Ethereum ETF at 0.14% fee with staking

Morgan Stanley Investment Management launched the Morgan Stanley Ethereum Trust at a 0.14% expense ratio, the cheapest spot ether ETF on the market.

"The addition of MSSE and MSOL reflects the natural evolution of our product suite, which seeks to provide simplified access to digital assets through the ETP wrapper," Ally Wallace, global head of ETFs at Morgan Stanley Investment Management, said.

The fund, trading on NYSE Arca under ticker MSSE, tracks the CoinDesk Ether Benchmark 4PM NY Settlement Rate and can stake between 50% and 80% of its ether holdings through Figment, an institutional staking provider. Morgan Stanley expects approximately 95% of staking rewards to pass through to shareholders and will not retain any portion for itself, according to the prospectus dated July 23. The ether is held by two custodians: Bank of New York Mellon and Coinbase Custody Trust Co.

MSSE follows Morgan Stanley's Bitcoin Trust, which accumulated about $400 million in assets within four months of its April launch, according to Bloomberg Intelligence analyst Eric Balchunas. The firm also launched a companion Solana product, MSOL, on the same day at the same 0.14% fee, bringing its digital asset ETP lineup to three products covering bitcoin, ether and Solana.

Ether traded at about $1,880 on July 28, up roughly 2% intraday after the announcement, though the token remains down 36.62% year to date and 50.51% over the past year. Bitcoin traded at around $63,630, down 27.28% year to date, a reminder that crypto assets do not move in lockstep.

The 0.14% fee undercuts established rivals including BlackRock's iShares Ethereum Trust and Fidelity's Ethereum Fund, whose sponsor fees sit higher or rely on temporary waivers. Morgan Stanley is charging less from day one while adding staking income on top, though the amount of ether staked and the resulting yield will vary based on network conditions and validator performance.

Staking introduces additional risks. The Ethereum protocol limits validator activations and exits per epoch, meaning staked ether can face lock-up periods extending days or weeks depending on queue demand. Slashing penalties may be assessed if validators misbehave, and there is no guarantee the trust will recover staked assets or rewards, per the prospectus.

Morgan Stanley Investment Management entered the ETF market in 2023 and now manages more than $14 billion across 22 products, including five Calvert ETFs, three Parametric ETFs, 11 Eaton Vance fixed income ETFs and three digital asset ETPs.

The things to watch in MSSE's first year are how quickly assets accumulate through Morgan Stanley's wealth-advisor network and E*TRADE retail platform, how much of the fund's ether is actually staked, and how closely the share price tracks the CoinDesk benchmark once real trading volumes settle in.

This article is for informational purposes only and does not constitute investment advice.