Exchange-traded note

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Exchange-traded Notes (ETNs) are exchange-traded bearer bonds that replicate the performance of an underlying asset 1-to-1. They are among the delta -1 instruments; the investment style is usually passive management .

Uncovered ETNs are usually issued directly from the issuer's bank balance sheet . The issuer itself guarantees the performance, i.e. H. there are no costs for swap agreements and credit protection. This also eliminates the replication error, so the performance only deviates from the base value by the amount of the reported management fee. However, the investor takes on an unsecured credit risk vis-à-vis the issuer, whereby for institutional order sizes there is usually a daily right of return at the net asset value and thus practically only an "overnight credit risk " exists.

In contrast to ETFs, ETNs are not special funds. Covered ETNs, like ETCs , can be secured by depositing the underlying asset or other collateral (e.g. government bonds ). The issuer also determines the amount of security.

history

Benefiting from US tax legislation, the first ETNs were issued in the United States in 2006. In Europe, ETNs were first in December 2009 by Barclays Capital on the trading platform Xetra of the German stock exchange AG offered. The most important providers of ETNs and ETCs in Europe include iPath (Barclays Capital), ETF Securities, Source and db Exchange Traded Commodities .

Differences to certificates

Even if ETNs are legally bonds, there are some differences to certificates . On the one hand, ETNs always precisely reflect the performance of the underlying index. In addition, independent market makers support the liquidity of the ETNs, while in the case of certificates, only the issuer guarantees trading. In contrast to certificates, the issuer of ETNs is therefore not involved in the spread , the trading premium. With ETNs, investors benefit from very narrow spreads, as several independent market makers compete with each other and thus set competitive prices. In addition, an indicative net asset value is continuously calculated for ETNs, which investors can use to evaluate the prices quoted on the market. Ultimately, ETNs can sell short. Investors can therefore take short positions with them, whereas this is not possible with certificates.

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