Overview

An exchange-traded product (ETP) is an umbrella term for an investment product that is listed and traded on a securities exchange and that typically seeks to provide exposure to the performance of an index, benchmark, asset class, or investment strategy. The term is not defined identically in every jurisdiction or market. In the United States, the U.S. Securities and Exchange Commission describes ETPs as including exchange-traded funds (ETFs), exchange-traded commodity trusts, and exchange-traded notes (ETNs).

FINRA describes ETPs as including ETFs, ETNs, commodity pools, and other product types.

ETPs trade throughout the trading day at market prices, similarly to ordinary shares, but their value is generally linked to an underlying portfolio, benchmark, asset, or strategy rather than to the business prospects of an operating company. Individual exchange-listed stocks and bonds are therefore not usually described as ETPs.

Characteristics

ETPs generally combine features of investment funds and exchange-listed securities. Like shares of stock, they can be bought and sold on an exchange during market hours, and their prices may fluctuate throughout the day. Many ETPs, particularly ETFs, also involve a primary-market creation and redemption process, often through broker-dealers or other institutional market participants, while most retail trading occurs in the secondary market.

ETPs may be index-tracking or actively managed. They may provide exposure to equities, bonds, commodities, currencies, crypto assets, volatility, or other benchmarks and strategies. Some ETPs hold a portfolio of assets, while others are debt instruments or trust interests whose return is linked to a reference asset or index. Because these structures differ, ETPs may have different costs, tax treatment, investor protections, and risks.

Exchange-traded funds

An exchange-traded fund (ETF) is a pooled investment fund whose shares are listed and traded on an exchange. In the United States, ETFs are registered with the SEC as open-end investment companies or unit investment trusts under the Investment Company Act of 1940. ETFs may track an index or be actively managed. Unlike traditional mutual funds, ETF shares usually trade throughout the day at market prices rather than being bought and redeemed by retail investors at end-of-day net asset value (NAV).

Exchange-traded notes

An exchange-traded note (ETN) is an unsecured debt obligation, typically issued by a bank or other financial institution, whose return is linked to the performance of a reference index or benchmark. Unlike an ETF, an ETN generally does not hold a portfolio of underlying assets. Investors in ETNs are exposed both to the performance of the referenced benchmark and to the credit risk of the issuer.

Commodity, currency, and crypto-asset ETPs

Some ETPs provide exposure to physical commodities, commodity futures, currencies, or crypto assets. In the United States, many commodity, currency, and crypto-asset ETPs are not registered as investment companies under the Investment Company Act of 1940, even when they are commonly referred to as ETFs or funds. Commodity ETPs may be structured as grantor trusts, commodity pools, or other vehicles, depending on the assets held and the applicable regulation.

In Europe, the term exchange-traded commodity (ETC) is commonly used for exchange-traded securities that track commodities such as precious metals, industrial metals, energy, or agricultural products. Deutsche Börse describes ETCs and ETNs as exchange-traded debt securities within the broader ETP group; ETCs are often collateralized by physical deposits or other collateral, while ETNs may be collateralized or uncollateralized.

Crypto-asset ETPs may be futures-based products or spot products that hold crypto assets directly. In the United States, spot bitcoin and spot ether ETPs are generally structured as exchange-traded commodity trusts rather than ETFs registered under the Investment Company Act of 1940.