Trading in ETNs
An ETN is an investment product that can be structured in many different ways with a wide choice of underlying instruments and products, and ETNs often apply a derivatives strategy. ETNs are normally issued by a financial institution, and are then traded in the secondary market in the same way as shares.
In most cases, ETNs are structured in a way that is designed to track the performance of an index, commodity or similar underlying contract, and this tracking can be either with or without a geared exposure. This kind of structure makes it easier for investors to invest in products that would otherwise be difficult for them to invest in themselves.
ETNs may use the following types of instrument as their underlying contract:
- shares or other financial instruments
- a share index, or a basket of shares or other financial instruments
- a currency or a basket of several currencies
ETNs involve a credit risk exposure to the issuer, and the credit market's view of the issuer may therefore affect the price over the life of the issue. Before you decide to buy any ETN, you should carefully consider the information provided in the issuer's base prospectus as well as the final terms for the particular ETN in question.
ETNs typically have a long maturity, and on the maturity date, which is the day on which the ETN comes to an end, the investment is settled either in cash (the most usual method) or by distributing the underlying shares/instruments. Settlement takes place automatically without the holder of the ETN having to take any action.
