What is an ETP and how can you trade on them?
ETPs, or exchange-traded products, are popular among investors and traders because they offer wide exposure across diverse asset classes. Discover different types of ETPs and how you can trade on them with us.
What is an ETP?
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.
As with other derivative instruments, the price of an ETP will change based on fluctuations in the asset it tracks. This means you could potentially profit from a market, whether it’s rising or falling in value.
Like shares, ETPs are traded on an exchange – such as the London Stock Exchange (LSE) – which usually means they’re only accessible during normal market hours. However, some issuers are beginning to offer round-the-clock trading on a few of these instruments.
Types of exchange-traded products
There are many types of exchange-traded products that traders and investors can access. Here are a few popular ETPs along with a basic definition:
- Exchange-traded funds (ETFs): a form of investment fund that’s bought and sold on stock exchanges. ETFs usually track the performance of a benchmark index and hold assets that help them to do just that
- Exchange-traded notes (ETNs): a type of exchange-traded product that enables you to trade the performance of an index or asset in the form of unsecured debt. This means that the issuer (usually a bank) prices the security based the underlying market it tracks but doesn’t physically own it. Because ETNs are not backed by any collateral, you could lose some or all of your capital should the issuer become unable to honour their debt to you
- Exchange-traded commodities (ETCs): tradeable financial derivatives that track the performance of a commodity, a group of commodities, or a basket of goods through an index. Some ETCs may consist of a swap agreement, which may or may not be secured by collateral. For this reason, some ETCs can be seen as a type of ETN
- Exchange-traded instruments (ETIs): financial securities that normally track an index but can also reflect the value of an actively managed investment portfolio. Note, however, that ‘ETI’ is sometimes used interchangeably with ‘ETP’ to refer to the overall category
- Exchange-traded derivative contracts: financial derivatives that are traded on exchange rather than over the counter (OTC) – such as stock options and currency futures
- Closed-end funds (CEFs): mutual funds that raise capital by issuing a fixed number of shares to be bought and sold on an exchange, but not redeemed.
This means you won’t own shares in the fund but rather you’re trading on the fund’s value with other market participants on an exchange
What are examples of exchange-traded products?
| Exchange-traded funds (ETFs) | The Invesco S&P 500 UCITS ETF is one of the more popular ETPs you can trade on our platform. It tracks the top performing 500 companies listed on the US S&P index |
| Exchange-traded notes (ETNs) | The exchange-traded notes available on our platform, like the Credit Suisse X-Links Silver Shares Covered Call ETN, are tradeable through a CFD account. |
| Exchange-traded commodities (ETCs) | We offer a range of exchange-traded commodities on our platform, such as the Invesco Physical Gold GBP Hedged ETC. Like the other ETPs listed above, you can trade on these assets with a derivative CFDs account from us |
| Exchange-traded instruments (ETIs) | As an alternative to getting an actively managed investment portfolio, you can actually trade on the value of a specific diversified portfolio. An example of this is the BlackRock ESG Multi-Asset Moderate Portfolio UCITS ETF that you can trade on using our CFD account |
| Exchange-traded derivative contracts | With a CFD account from us, you can trade exchange-traded derivative contracts like options and futures. |
| Closed-end funds (CEFs) | Like the other ETPs on this list, you can trade on closed-end funds with us – such as the Invesco CEF Income Composite Portfolio. Open a CFD account to get started |
Note that some of the products listed above are complex, and you may need to complete an appropriateness questionnaire before trading on them.
ETFs vs ETNs vs ETCs
ETFs, ETNs and ETCs are some of the more popular types of exchange-traded products available on the market. While they may have similarities, there are a few differences to take note of. Below is a basic comparison of the products’ key features.
| ETFs | ETNs | ETCs | |
| Key feature | A tradeable security that holds the asset, group of assets or sector it tracks | A debt security, almost like a bond, issued by a financial institution such as a bank | An exchange-traded security that closely tracks a single commodity, a group of commodities or a basket of goods through an index |
| How to access them | • Over the counter (using CFDs) | • Over the counter (using CFDs) | • Over the counter (using CFDs) |
| Pays dividends | No | No | No |
| Main benefit | Enables you to trade on multiple assets or on an entire sector through a single trade, making them more cost-efficient than buying each one individually | Give traders the opportunity to get exposure to important, exotic securities (like currencies) and new markets (like foreign emerging markets) | Traders can buy ETCs to gain wide exposure to a commodity or group of commodities on exchange without needing to trade futures or physically own them |
| General risk level | Moderately high | Moderately high | Moderately high |
How to trade ETPs
- Create a CFD account or log in
- Search for your opportunity
- Select ‘buy’ to go long, or ‘sell’ to go short
- Set your position size and take steps to manage your risk
- Open and monitor your position
CFD trading
Over-the-counter derivatives like CFDs enable traders to speculate on the price direction of a market – whether it’ll increase or decrease.
CFDs are leveraged, which means you’ll gain full exposure to the underlying market for a fraction of the cost, known as the margin. While this means any profits made can be amplified, so too will any losses you incur.
Our CFD account gives you access to thousands of financial markets, including ETFs, ETNs, ETCs and other exchange-traded products. There are different ways to trade CFDs – via spot markets, futures or options.
Find out more about CFDs
Options
Options are a type of tradeable derivative contract that give the holder the right, but not the obligation, to buy or sell an underlying asset at a fixed price – provided it moves beyond that price within a set timeframe.
You can trade ETP options using CFDs, which means you can trade the markets by going long (known as buying a call option) or short (buying a put option).
Learn more about options trading
Futures
Futures (also known as ‘forwards’ in shares, ETFs and forex markets) are financial contracts in which two parties – a buyer and a seller – agree to exchange an underlying market for a set price at a future date.
These instruments give the buyer the obligation to buy the asset, and the seller the to sell it, on or before the contract expires. As with options, you can trade futures using a CFD trading account from us.
Discover our futures trading offering
How to trade on ETPs summed up
- Exchange-traded products or ETPs are securities that are listed on an exchange and can be traded using our CFD account
- Some of the more popular kinds of ETPs are exchange-traded funds (ETFs), exchange-traded notes (ETNs) and exchange-traded commodities (ETCs)
- ETFs are a type of investment fund that seek to track the performance of a benchmark index
- ETNs enable you to speculate on the value of an index or asset in the form of unsecured debt
- ETCs closely track a commodity, group of commodities or a basket of goods through an index
1 Based on revenue excluding FX (published financial statements, October 2022).
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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