Exchange-Traded Product (ETP) (2024)

A financial product that is publicly traded like a bond in the stock market

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An exchange-traded product (ETP) refers to a financial product that is publicly traded like a bond in the stock market. ETPs offer a cost-effective and safe way to diversify an investment portfolio by acquiring exposure to an index or asset class. They are passive investments, with typically lower fees than index funds and active mutual funds, making ETPs an easy entry for investors to get exposed to a wide variety of assets.

Exchange-Traded Product (ETP) (1)

Originally, exchange-traded products merged the cost-effective, benchmark approach of the stock index funds with the securities’ intraday marketability. As the markets evolved, ETPs now cover exposure to a growing number of asset groups.

Today, along with offering replication of a stock index, ETPs also allow investors to diversify their investments by providing exposure to asset classes that were historically difficult to reach.

Summary

  • An exchange-traded product (ETP) refers to a financial product that is publicly traded like a bond in the stock market.
  • Exchange-traded products also let investors diversify their investments and buy and sell like shares.
  • ETPs are designed to resemble an underlying index or asset’s return, with convenient share tradability and access.

Types of Exchange-Traded Products

1. Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) are investment funds that trade as a single security on the stock exchange. Since the introduction of ETFs in 1993, they’ve expanded significantly in terms of range and variety.

Usually, an ETF tracks an index fund, such as the S&P 500, but it can also follow a market, commodity, industry, or even a currency. The price of an exchange-traded fund will increase and decrease, much like most investments. The ETFs trade all through the day in the same way a stock trades.

2. Exchange-Traded Commodities (ETCs)

Exchange-traded commodities (ETCs) are debt instruments that do not come with interest payments. They are designed to provide access to an individual product or a basket of items. The ETC framework is often used to provide investors with significant exposure to currencies, either as individual currency pairs or as a currency basket.

3. Exchange-Traded Notes (ETNs)

Similar to ETCs, exchange-traded notes (ETNs)are debt securities that do not pay interest. These are only intended to track the return on the related asset or index. However, the issuing entity of both is different.

While Special Purpose Vehicles (SPVs) with segregated reserves issue ETCs, ETNs are usually issued by banks, do not hold any assets, and are unsecured. Although the yields of ETNs correspond to the underlying index or asset, they are identical to unsecured and classified bonds.

Characteristics of an Exchange-Traded Product

1. Passive investment

Exchange-traded products are a transparent and cost-effective way to get exposed to an asset class, as maintenance fees are usually smaller than the index funds or active mutual funds.

2. Tracks an underlying asset

An exchange-traded product seeks to provide the same yield as the underlying index or asset, providing a diversified investment in a single transaction.

3. Listed on the exchange

The performance of the investment in ETPs is accessible on an intraday basis through the accessibility of live prices.

4. Liquid asset

An exchange-traded product (ETP) is a liquid asset backed by a pool of market makers and approved members.

5. Trades like shares

ETPs are designed to resemble an underlying index or return of an asset, with convenient trading and access. They are just as easy to buy and sell as the shares; at any moment, the market is available.

Reasons to Use an Exchange-Traded Product

1. Flexible

Exchange-traded products can provide investors with access to an alternate asset class or a whole index with a single transaction.

2. Accessible

ETPs may be acquired and exchanged while the stock exchange is open, as prices are quoted throughout the day.

3. Cost-effective

They offer a cost-effective way to diversify by benchmarking or getting exposed to investments that were historically inaccessible.

4. Transparent

Unlike some investment instruments, exchange-traded products are released regularly. The visibility makes it easy for investors to see just what they own.

5. Simple

ETPs are financial instruments listed and exchanged in the same manner as shares across the same exchanges and platforms.

Additional Resources

CFI is the official provider of the global certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • Currency Pair
  • Underlying Asset
  • Exchange-Traded Derivatives
  • Unsecured Note
  • See all wealth management resources
Exchange-Traded Product (ETP) (2024)

FAQs

What is the product of ETP? ›

Exchange-traded products are financial instruments traded on stock exchanges that provide investors with exposure to diverse asset classes such as stocks, bonds, commodities, and currencies. ETPs can be ETFs, ETNs, ETCs, or other vehicles representing structured investment products.

What does ETP mean trading? ›

An exchange-traded product (ETP) refers to a financial product that is publicly traded like a bond in the stock market. ETPs offer a cost-effective and safe way to diversify an investment portfolio by acquiring exposure to an index or asset class.

What is the difference between ETFs and ETPs? ›

Exchange-traded funds (ETFs) are a specific type of ETP that tracks an underlying index and can be bought and sold on an exchange throughout the trading day. ETPs also include other exchange-traded instruments, such as exchange-traded notes (ETNs) and exchange-traded commodities (ETCs).

What does the ETP stand for? ›

Exchange traded products, or ETPs, are a variety of financial instruments that are traded throughout the day on national exchanges.

How does ETP work? ›

The principle of operation of ETP is Physico-Chemical treatment followed by Polishing Treatments like –Sand Filtration, Activated Charcoal treatment (Adsorption), Ozonisation (Chemical Oxidation), Ultra Filtration (UF), Reverse Osmosis (RO) and evaporation (If required). Features : Semi-automatic Operation.

What is an ETP item? ›

One lump sum may be an employment termination payment (ETP). Your ETP amount may include: payments for unused sick leave or unused rostered days off. payments in lieu of notice. a gratuity or 'golden handshake'

Is a stock an ETP? ›

Exchange-traded products (ETPs)—including exchange-traded funds (ETFs), exchange-traded notes (ETNs) and some other similar product types—are investment vehicles that are listed on an exchange and can be bought and sold throughout the trading day like a stock.

Is ETP a good investment? ›

Although any sort of investment is risky, ETPs are sometimes considered to be less risky than other investment strategies. Some ETPs, like ETFs, carry less risk than investing in a single company, because of the fact that they follow an index.

Why invest in ETP? ›

ETPs are accessible and can be bought and sold whenever the stock exchange is open. The relatively low costs associated with managing ETPs, compared to other investments, make them a cost-effective way for investors to gain access to a wide range of asset classes.

Do ETPs pay dividends? ›

Do Leverage Shares ETPs pay dividends? No. Leverage Shares uniquely replicates the payout of its ETPs physically, so it holds the stocks underlying its leveraged ETPs and receives the dividends on such stocks.

Is it better to own stocks or ETFs? ›

Investing in an individual stock can deliver very high returns, and you won't be taxed on any capital gains until you sell, in a taxable account. A single stock can potentially return a lot more than an ETF, where you receive the weighted average performance of the holdings.

How does an exchange-traded fund work? ›

ETFs or "exchange-traded funds" are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.

Are exchange traded products derivatives? ›

Exchange-traded notes (ETNs) are unsecured derivative debt obligations issued by banks or investment firms with a repayment value linked to an index or basket of assets.

How do exchange traded notes work? ›

An exchange-traded note (ETN) is an unsecured debt security that tracks an underlying index of securities. ETNs are similar to bonds but do not pay periodic interest payments. Investors can buy and sell ETNs on major exchanges, like stocks, and profit from the difference, subtracting any fees.

What does ETP produce? ›

An ETP (or exchange-traded product) is a tradeable financial instrument that closely tracks an underlying market, such as indices, currencies and shares. They're derivative securities that work by repackaging the value of an underlying asset and listing it on an exchange to be traded publicly.

What is the chemical composition of ETP? ›

ETP- Copper – Electrolytic Tough Pitch Copper
Chemical CompositionWeight percentage
Copper [Cu]99.9 %
Oxygen [P]50 to 400 PPM
Lead [Sn]0.005% Max.
Total Impurity< 0.02%

What does ETP stand for in manufacturing? ›

ETP stands for Effluent Treatment Plant. It is a system that removes toxic and non-toxic material from water and making it usable for various purposes. An ETP is a plant where the treatment of industrial effluents and waste waters is done.

What is ETP material? ›

ETP (Electrolytic Tinplate).

Low carbon steel coated with tin with a layer between them of steel-tin alloy and destined to be used mainly in the production of metal cans. Tin provides good weldability and electrical conductivity, as well as high corrosion resistance.

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