Exchange-traded Note

Exchange -traded notes (ETNs ) are exchange-traded bearer bonds, the 1 -to-1 to replicate the performance of an underlying asset zugrundgelegten. So you are so-called Delta 1 instruments and are among the so-called passively managed investment products.

Unfunded ETNs are generally issued directly from the bank's balance sheet of the issuer. The issuer itself guarantees the performance, namely the cost of swap agreements and credit protection is omitted. This also eliminates the tracking error, the performance differs only by the amount of stated management fee from the Underlying. However, the investor enters into an unsecured credit risk to the issuer, where institutional order sizes mostly a daily right of return at net asset value and is so handy just an " overnight credit risk" is involved.

Covered ETNs can, such as ETCs by the deposit of the underlying asset or other safe investments (such as government bonds) to be collateralized. However, these are, as opposed to fund, not the fund. The level of security is determined by the issuer itself

History

Aided by the U.S. tax laws, the first ETNs were issued in 2006 in the United States. In Europe, ETNs were first offered by Barclays Capital on the Xetra trading platform of the German Stock Exchange in December 2009. Among the most important providers of ETNs and ETCs in Europe include iPath ( Barclays Capital), ETF Securities, source and db Exchange Traded Commodities.

Differences to allowances

Even if it is legally Notes when ETNs, there are some differences to allowances. Firstly ETNs form always exactly reflect the performance of the underlying index. In addition, an independent market maker support the liquidity of the ETNs, while only guaranteed if the issuer certificates trading. Unlike certificates, the issuer of ETNs therefore is not even on the spread, trade impact involved. With ETNs, investors benefit from very tight spreads, as several independent market makers compete with each other and so provide competitive prices. In addition, an indicative net asset value is calculated for ETNs continuously evaluate the prices quoted in the market based on its investors. Ultimately, short sales are possible with ETNs. Investors can therefore take them with short positions, whereas this is not possible with certificates.