What is an exchange-traded product (ETP)?

Exchange-traded products (ETP) are a type of security that is derivatively priced and trades intra-day on a national securities exchange. ETPs are priced so the value is derived from other investment instruments, such as a commodity, a currency, a share price or an interest rate. Generally, ETPs are benchmarked to stocks, commodities or indices. ETPs include exchange-traded funds (ETFs), exchange-traded notes (ETNs) and certificates.

The ETP that is the most popular is the ETF. ETFs are securities that track an index, commodity or basket of assets. ETNs, on the other hand, are a type of unsecured, unsubordinated debt security. The value of an ETN can be affected by the credit rating of the issuer and not just changes in the underlying index.

ETPs such as the ETF were developed out of the desire to create a fund that had more flexibility than the mutual fund. Mutual funds are typically priced just once at the end of the trading day, but ETFs trade like stocks and can be bought and sold throughout the day.

The low-cost structure of ETPs has contributed to their popularity. Many ETPs are lower-cost index funds, which continue to attract assets away from potentially higher-cost actively managed funds.

Crypto-based ETP, backed by the Swiss startup Amun AG, is launching on SIX Swiss Exchange this week. ETP will be listed under the ticker of HODL, and will track the biggest cryptos by market share and accordingly allocates assets. The fund consists of five major cryptocurrencies: Bitcoin (48,13%), Ripple (29%), Ethereum (16,39%), Bitcoin Cash ABC (3,74%), and Litecoin (2,74%).

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