What is an ETP and how can you trade or invest?

What is an ETP?

An exchange-traded product (ETP) is a financial security that trades on a stock exchange, just like a regular share. ETPs are designed to give you exposure to various markets, such as stock indices, commodities, currencies or bonds, without having to buy the underlying assets directly.

ETPs track the performance of an underlying asset or index. When that asset's value moves up or down, the ETP's price typically follows. This means you can potentially profit whether markets are rising or falling, depending on the type of ETP you choose.

Like shares, ETPs trade on exchanges such as the London Stock Exchange (LSE), which traditionally means they're accessible only during normal market hours. However, some issuers now offer extended or round-the-clock trading on select products.

Why Use ETPs?

ETPs offer several advantages:

• Diversification — access to entire markets or sectors through a single security
• Accessibility — trade markets that might otherwise be difficult or expensive to access (like commodities or foreign indices)
• Flexibility — buy and sell throughout the trading day at market prices
• Lower costs — often cheaper than actively managed mutual funds
• Transparency — holdings and performance are typically disclosed regularly

Types of Exchange-Traded Products

Exchange-Traded Funds (ETFs)

The most common type of ETP. ETFs are investment funds that hold a basket of actual securities (like shares or bonds) to track a benchmark index. For example, an S&P 500 ETF would own shares in the 500 companies that make up that index. Because ETFs hold the underlying assets, they're generally considered lower risk than some other ETP types.

Exchange-Traded Notes (ETNs)

ETNs are unsecured debt instruments issued by financial institutions (usually banks). They promise to pay returns based on an index's performance but don't actually hold any underlying assets. Instead, you're relying on the issuer's promise to pay.

Exchange-Traded Commodities (ETCs)

ETCs track the performance of physical commodities (like gold, oil, or agricultural products) or commodity indices. Some ETCs hold the actual commodity (particularly common with precious metals), while others use derivatives like futures contracts or swap agreements.

ETCs using swaps without collateral function similarly to ETNs and carry issuer risk.

Exchange-Traded Instruments (ETIs)

A broader category that includes securities tracking either an index or an actively managed portfolio. The term "ETI" is sometimes used interchangeably with "ETP" to refer to the entire category of exchange-traded products.

Exchange-Traded Derivative Contracts

These are standardized derivatives—such as stock options and currency futures—that trade on regulated exchanges rather than over-the-counter (OTC). Trading on an exchange provides greater transparency and reduces counterparty risk compared to OTC derivatives.

Closed-End Funds (CEFs)

CEFs are investment funds that issue a fixed number of shares through an initial public offering, which then trade on an exchange. Unlike open-ended mutual funds or ETFs, CEFs don't create or redeem shares based on investor demand. You own actual shares in the fund, but you can only buy or sell them by trading with other investors on the exchange—not by redeeming them directly with the fund.

This fixed structure means CEFs can trade at a premium or discount to their net asset value (NAV), creating unique opportunities and risks.

Key ETP factors to consider 

As with all investing products, there are trade-offs to contemplate:

• Fees — while generally lower than mutual funds, ETPs still charge management fees that vary by product
• Liquidity — some ETPs trade more actively than others, affecting how easily you can buy or sell
• Tracking error — the ETP's performance may not perfectly match its underlying index
• Counterparty risk — particularly relevant for ETNs and some ETCs that don't hold physical assets
• Tax treatment — different ETP types may have different tax implications depedenent on your jurisdiction

Comparing Exchange-Traded Products

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.

How to invest of trade in ETPs with us

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.

Discover share dealing with us

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

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