What is an exchange-traded product?
An exchange-traded product (ETP) is an investment product listed on a stock exchange whose price follows an index, an asset, or a basket of assets, and which you buy and sell during trading hours like a share.
ETP is an umbrella term. The fund or note itself is the product. The exchange is only where it is listed and traded.
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Formal definition
An ETP is a security that:
- is admitted to trading on a regulated exchange,
- aims to track a reference value such as an index, a commodity price, a currency or a strategy, and
- can usually be created or redeemed by authorised participants (large dealers). This creation and redemption keeps the market price close to the value of the holdings.
The main legal forms are:
| Type | What you hold | Main extra risk |
|---|---|---|
| ETF (exchange-traded fund) | Units of a fund that owns the assets, usually kept by a custodian | Tracking error, fund costs |
| ETN (exchange-traded note) | Unsecured debt of the issuer | Issuer default (counterparty risk) |
| ETC (exchange-traded commodity) | A note or certificate linked to a commodity, sometimes backed by physical metal | Issuer risk, futures roll costs |
Worked example (hypothetical)
Take a hypothetical ETF that tracks a stock index. At the end of each day the fund publishes its net asset value (NAV), which is the value of its holdings per unit after costs.
During the day the units trade on the exchange at a market price set by buyers and sellers:
- If the market price is above NAV, the unit trades at a premium. Authorised participants can create new units and sell them, which pushes the price back down.
- If the market price is below NAV, it trades at a discount. They can buy units and redeem them for the underlying assets.
In a liquid ETF the gap stays small. In a thinly traded ETP, or when the underlying market is closed, the gap can be wide.
ETP vs ETF
Every ETF is an ETP, but not every ETP is an ETF. "ETP" also covers ETNs and ETCs, which are debt instruments rather than funds. This matters because if an ETN issuer fails, holders are unsecured creditors. An ETF's assets are normally held separately from the manager.
Edge cases
- Leveraged and inverse ETPs aim for a multiple of the daily move, or its opposite. Over several days the result can differ a lot from the index because of daily rebalancing. They can lose money fast.
- Commodity ETPs based on futures gain or lose from the futures roll, especially in contango.
- Closed-end funds are listed but have no regular creation or redemption, so they can trade far from NAV. See open-end vs closed-end fund.
- CFDs on ETFs are not ETPs. A CFD is a derivative contract with a broker, not ownership of fund units. Leveraged CFD trading can lose money fast.
- An ETP can be closed by its issuer or removed from the exchange. See delisting.
Where the term appears
- Exchange and broker screens: ETPs often have their own category or symbol suffix, with NAV, premium/discount and expense ratio shown.
- Fund factsheets and reports: tracking difference, holdings, replication method (physical or synthetic).
- News: "inflows into gold ETPs", "spot crypto ETP approved", "ETN suspended".
In Pakistan, the supervisor of listed securities is the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers. Also, per the SECP, lists of licensed brokers are on the PSX and PMEX websites.
Related terms
Frequent questions
What does exchange-traded product mean in simple words?
It is a fund or note listed on an exchange that tracks something else, such as an index or gold, and trades like a share.
Is an ETP the same as an ETF?
No. An ETF is one kind of ETP. ETPs also include ETNs and ETCs.
Can an ETP price differ from its NAV?
Yes. It can trade at a premium or a discount, especially when liquidity is low or the underlying market is closed.
Is an ETN riskier than an ETF?
It carries an extra risk. An ETN is issuer debt, so its value depends on the issuer being able to pay.
Is a CFD on an ETF an ETP?
No. It is a broker contract on the ETF's price, with no ownership of fund units.