Exchange-Traded Product (ETP): A Broad Category of Marketable Securities Traded on Stock Exchanges

An Exchange-Traded Product (ETP) is a type of investment that trades on a stock exchange and is designed to track the performance of an underlying asset, index, or benchmark.
It combines the flexibility of a stock with the diversification or exposure of other asset classes such as commodities, currencies, or bonds.

In simple terms, an ETP lets investors buy and sell exposure to different markets throughout the trading day, just like shares of a company.

Core Idea

ETPs serve as umbrella instruments that include several specific types of exchange-traded securities:

Exchange-Traded Funds (ETFs) – Track stock or bond indexes.

Exchange-Traded Commodities (ETCs) – Track commodity prices like gold or oil.

Exchange-Traded Notes (ETNs) – Are debt securities that track an index or strategy.

All ETPs are listed and traded on stock exchanges, allowing investors to gain diversified exposure or follow specific strategies without directly owning the underlying assets.

In Simple Terms

Think of an ETP as a wrapper that holds different kinds of investments.
Instead of buying multiple individual assets, you can buy a single ETP that mirrors their combined performance.
For example, buying an ETP linked to the S&P 500 gives you exposure to the entire index rather than 500 separate stocks.

Example

Suppose you want to invest in gold.
You could buy a gold ETC (a type of ETP) that tracks the spot price of gold.
If gold rises by 3%, the value of your ETC should rise by roughly the same amount (minus fees).

Similarly, an S&P 500 ETF is also an ETP — it tracks the performance of the 500 largest U.S. companies.

How ETPs Work

Listed on Exchanges: ETPs trade on major stock exchanges like ordinary shares.

Transparent Pricing: Their prices fluctuate throughout the day based on supply, demand, and the underlying asset’s value.

Creation and Redemption Mechanism: Authorized participants (large institutions) can create or redeem ETP shares to keep prices close to the underlying asset’s value.

Tracking Objective: Each ETP is designed to replicate the performance of its underlying benchmark as closely as possible.

Real-Life Application

ETPs are widely used by both retail and institutional investors for:

Diversification: Accessing broad markets through a single product.

Hedging: Managing risk by gaining or offsetting exposure to specific assets.

Tactical trading: Quickly entering or exiting markets due to intraday liquidity.

Cost efficiency: Lower fees than many traditional mutual funds.

They cover a wide range of asset classes including equities, fixed income, commodities, currencies, and even volatility indexes.

Common Misconceptions and Mistakes

“ETP means ETF”: ETFs are just one type of ETP. The term covers ETFs, ETNs, and ETCs.

“All ETPs hold physical assets”: Some ETPs are synthetic, using derivatives to mirror returns.

“They are risk-free”: Market, credit, and tracking risks still apply depending on the ETP’s structure.

“ETPs always perfectly match the index”: Tracking errors can occur due to management costs or replication methods.

Related Queries Investors Often Search For

What is the difference between ETFs, ETNs, and ETCs?

Are ETPs suitable for long-term investment?

How are ETPs traded and priced?

Do ETPs pay dividends?

What risks should I consider before investing in an ETP?

Summary

An Exchange-Traded Product (ETP) is a security that tracks the performance of an underlying asset or index and trades on an exchange like a stock.
ETPs include ETFs, ETNs, and ETCs, offering investors flexible, transparent, and low-cost access to a wide range of markets.
They are ideal tools for diversification, portfolio management, and efficient market exposure.