ETPs

Exchange-traded products (ETPs) are a broad class of securities that provide exposure to an underlying asset, index, or strategy and trade on public exchanges like stocks.

The most common subtypes are exchange-traded funds (ETFs), which hold a portfolio of assets designed to track a benchmark; and exchange-traded notes (ETNs), which are unsecured debt obligations of an issuer that promises to deliver the index return, less fees. Other ETPs include exchange-traded commodities (ETCs) and leveraged or inverse ETPs, which seek multiples or inverse returns of a target index.

Most ETPs seek to replicate the performance of their target; many are passively managed. They use a creation/redemption process with authorized participants to align trading prices with the underlying value, resulting in intraday liquidity and transparent pricing.

Advantages include intraday trading, transparency of holdings (for many ETFs), access to broad asset classes and regions, and typically lower costs than traditional mutual funds.

Key risks: tracking error, fees, and bid-ask spreads can affect performance; liquidity risk; ETNs carry issuer credit risk; leveraged and inverse ETPs reset daily and are not suitable for long-term holding.

Tax treatment varies by jurisdiction and structure; in the United States, ETFs are typically regulated as investment companies, while ETNs are debt instruments. Investors should consider expense ratios, replication method, tax implications, and the liquidity of the underlying market.