- Other markets
- IG services
- Trading platforms
- Market insight
- Trading skills
Find out how exchange traded products (ETPs) combine the best qualities of various investment vehicles. Learn about the different types of ETPs and the diverse range of markets you can trade on.
|What is an ETP?||Types of ETP||Trading ETPs||Benefits and ways to trade|
|Introduction to ETPsWhat do ETPs do?How do ETPs work?Understanding ETPsGrowth of ETPs||Exchange Traded Funds (ETFs)Exchange Traded Commodities (ETCs)Summary of ETP types||Who trades ETPs?How to tradeTrade on marginCosts and pricing||Benefits of ETP tradingWays to trade ETPs|
Typically only large institutional investors (‘authorised participants’) actually trade shares of an ETP directly with the fund manager. However, they then act as market makers, allowing individual investors to trade ETPs with them on the secondary market.
These authorised participants provide liquidity in the market and help ensure the close correlation between the intraday market price and the actual net asset value of the relevant underlying assets. Typically the deviation between the market price and the net asset value is less than 2%.
ETPs are traded in the same way as shares. If you already trade stocks or other securities with a stockbroker or investment management company, you should also be able to trade ETPs. Typically ETPs can be traded over the phone or electronically, online.
ETPs can be traded on margin, so you need only place a margin that is a fraction of the overall cost.
When trading on margin, it’s important to be aware that if the market moves against you it is possible to lose much more than your initial margin. Using leverage in this way gives you access to the full value of the underlying market, just as much when it moves for you as when it moves against you.
See our leverage module to find out more about margin trading.
As with other securities traded on exchange, generally there are commission costs associated with ETP trading.
With ETPs, you place a single trade on a collective basket of assets, rather than trading each asset individually. This means there are significant savings to be made. Commissions are typically charged as a percentage of the total investment.
There are a number of other fees associated with funds, for example, which do not apply with ETPs. These may include loads, redemption fees, short-term trading fees and stamp duties. A cost associated with ETPs is the spread.
This spread is the difference between the best offered price (bid) and the best sale price (ask). If you are buying an ETP, you buy at the ask price, so the difference between the actual price and the ask price is a direct cost to you.
The size of the spread depends on factors such as liquidity and volatility in the ETP itself and the assets being tracked.