What is an ETP and how can you trade or invest?
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 or invest in 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 and invest in 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 spread betting and CFD accounts. You can also get a share dealing account to invest in them |
| 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 both trade and invest in these assets with a derivatives or investments account from us |
| Exchange-traded instruments (ETIs) | As an alternative to getting an actively managed investment portfolio – like our IG Smart Portfolios – you can actually trade and invest in the value of a specific diversified portfolio. An example of this is the BlackRock ESG Multi-Asset Growth Portfolio UCITS ETF that you can trade on using our CFD or spread bet accounts, or invest in from a share dealing account |
| Exchange-traded derivative contracts | With a CFD or spread betting account from us, you can trade exchange-traded derivative contracts like options and futures. You can also invest in the popular -1x Short VIX Futures ETF from a share dealing account |
| Closed-end funds (CEFs) | Like the other ETPs on this list, you can trade and invest in closed-end funds with us – such as the Invesco CEF Income Composite Portfolio. Open a CFD, spread betting or share dealing account to get started |
Note that some of the products listed above are complex, and you may need to complete an appropriateness questionnaire before you can invest in 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 | • Individual savings account (ISA) • Self-invested personal pension (SIPP) • Over the counter (eg using spread bets and CFDs) |
• Individual savings account (ISA) • Self-invested personal pension (SIPP) • Over the counter (eg using spread bets and CFDs) |
• Individual savings account (ISA) • Self-invested personal pension (SIPP) • Over the counter (eg using spread bets and CFDs) |
| Pays dividends | Yes (some ETFs) | No | No |
| Tax treatment (UK)* | Depending on the type of ETFs, long-term capital gains tax is payable on assets held for more than one year, and normal income tax rates apply if held for under a year | No stamp duty currently applies for trading ETNs, but you could still be subject to short or long-term capital gains tax for selling your holdings | As with ETNs, no stamp duty currently applies for exchange-traded commodities. However, you may still need to pay capital gains tax for selling your holdings |
| Main benefit | Enables you to trade and invest in multiple assets or 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 | Low | Moderate | Moderately high |
| Associated risk | Price may diverge from the value of the asset it tracks (known as a tracking error) due to a number of factors, which could affect returns | Because this is a debt security, investors may lose the entirety or some of their capital should the issuing entity be unable to pay it at maturity | Commodity prices can be extremely volatile, with some moving by more than 10% in a single day |
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
How to trade ETPs
- Create an account or log in
- Choose between spread bets and CFDs and 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
How to invest in ETPs
- Create an account or log in
- Search for the ETP you want to invest in
- Select ‘buy’ in the deal ticket (you can only go long when investing)
- Input the position size
- Open and monitor your position
Share dealing
With our share dealing account, you can buy and sell local and international stocks as well as exchange-traded products like mutual funds, trusts, exchange-traded funds and ETCs.
When you use this method to access the markets, you’re essentially buying shares in the asset to own in the hope that they rise in value over time so that you can sell them for a profit. For this reason, you can only take a long position in your share dealing account.
CFD trading
In addition to building a diversified investment portfolio with ETPs, you can also trade on them using over-the-counter derivatives like CFDs. They 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
Spread betting
We invented financial spread betting in 1974 – so who better to trade ETPs using this method than the world’s leading provider?1 As with CFDs, you can use your spread betting account to trade on spot, futures and options markets.
This method of trading the markets involves speculating on whether an asset will rise or fall in value by going ‘long’ or ‘short’, respectively. Spread bets are also leveraged derivatives, meaning you put down a fraction of the cost of the full trade size to gain exposure to the market you’re trading. Remember, both profits and losses will be calculated on the full position size.
Read more about spread betting
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 or spread bets, 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 spread betting or CFD trading account from us.
Discover our futures trading offering
How to trade and invest in ETPs summed up
- Exchange-traded products or ETPs are securities that are listed on an exchange and can be traded using our CFD or spread betting accounts, or invested in through our share dealing 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 (published financial statements, 2023)
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. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
