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Exchange-Traded Products (ETPs): Meaning, Types & Examples

Nupur Wankhede

Discover Exchange-Traded Products to learn how ETPs offer diversified market exposure through exchange-listed instruments.

Exchange-Traded Products (ETPs) are one of the most popular investment vehicles globally. They offer diversification, transparency, and relatively lower costs compared to many traditional investment structures.

What Are Exchange-Traded Products (ETPs)

Exchange-Traded Products (ETPs) are financial instruments that trade on stock exchanges, similar to shares.

They track an underlying asset, index, commodity, currency, or strategy.

Key features:

  • Bought and sold like stocks

  • Prices fluctuate throughout market hours

  • Designed to mirror the performance of an underlying benchmark

  • Lower cost than many actively managed funds

Common assets tracked by ETPs include equity indices (NIFTY 50, S&P 500), commodities (gold), bonds, and currencies.

How Exchange-Traded Products Work

ETPs are structured so that their market price closely follows the value of the underlying asset they track.

They function through:

  1. Creation & Redemption Mechanism
    Authorised Participants (APs) create or redeem ETP units to ensure price stability.

  2. Underlying Benchmark Tracking
    The ETP holds or synthetically replicates the assets it tracks.

  3. Stock Exchange Trading
    Investors buy/sell units directly through their brokerage accounts.

This mechanism keeps ETP prices efficient, transparent, and relatively low-cost for investors.

Types of Exchange-Traded Products

Here are the major categories of ETPs you’ll come across:

1. ETFs (Exchange-Traded Funds)

They track a range of underlying benchmarks such as stock indices, sectors, commodities, or bonds.

2. ETNs (Exchange-Traded Notes)

Unsecured debt instruments that aim to track the performance of a specified index and are subject to the credit risk of the issuing entity.

3. ETCs (Exchange-Traded Commodities)

Provide exposure to commodity markets by replicating the performance of assets such as gold, silver, oil, or agricultural products.

4. Leveraged & Inverse ETPs

Designed to provide amplified exposure (such as 2x or 3x) or inverse exposure to the underlying benchmark. These products generally carry higher risk due to their leverage and daily rebalancing structure.

5. Currency ETPs

Track global currencies or currency baskets.Their characteristics differ according to the underlying currencies and the methodology used to replicate them.

Benefits of Exchange-Traded Products (ETPs)

Here are the key benefits of Exchange-Traded Products (ETPs):

Diversification

Gain exposure to multiple assets through a single product.

Lower Costs

ETPs usually have lower expense ratios than mutual funds.

High Liquidity

Trade anytime during stock market hours at available prices.

Transparency

Holdings are often disclosed daily.

Flexibility

Invest in themes, sectors, commodities, or global markets effortlessly.

Risks of Exchange-Traded Products

ETPs carry certain risks that depend on their structure, underlying assets, and market conditions, such as:

Market Risk

ETP prices move with their underlying asset.

Tracking Error

Returns may slightly deviate from the index.

Liquidity Risk

Low-volume ETPs can have wider spreads.

ETN Credit Risk

ETNs depend on the issuer’s financial health.

High Risk for Leveraged Products

Designed for short-term trading, not long-term investing.

Exchange-Traded Products in India

In India, ETPs include:

  • Equity ETFs (NIFTY 50, NIFTY Next 50, SENSEX)

  • Gold ETFs

  • Debt ETFs

  • International ETFs

  • Silver ETFs

  • The Bharat Bond ETF (popular government-backed debt ETF)

ETPs in India are regulated by SEBI and traded on NSE and BSE.

Conclusion & Key Takeaways

Exchange-Traded Products (ETPs) are convenient, transparent, and cost-efficient investment tools.

They offer investors access to diversified portfolios across asset classes with ease.

In summary:

  • ETPs trade like stocks

  • They track a wide range of underlying assets

  • They offer diversification and liquidity

  • Risks vary depending on structure (ETFs vs ETNs vs leveraged ETPs)

Traditional ETFs are structured to offer straightforward access to various asset classes while reflecting market performance.

Disclaimer

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.

FAQs

What are exchange-traded products (ETPs)?

Exchange-traded products are marketable securities that trade on stock exchanges and are designed to track an underlying asset, index, commodity, or investment strategy.

What are the types of ETPs?

Common types include Exchange-Traded Funds (ETFs), Exchange-Traded Notes (ETNs), Exchange-Traded Commodities (ETCs), leveraged ETPs, and currency-based ETPs, each offering different structures and exposures.

How do exchange-traded products work?

ETPs follow a specified benchmark and trade throughout the day like shares. They typically rely on a creation and redemption mechanism managed by authorised participants to keep prices aligned with net asset value.

What are examples of exchange-traded products?

Examples include Nifty 50 ETFs, Gold ETFs, Nasdaq-focused ETFs, crude oil ETPs, and currency ETPs that provide exposure to major global currencies.

What are the benefits of ETPs?

Key benefits include lower costs, high transparency, intraday liquidity, and instant diversification across assets, sectors, or geographies.

What are the risks of investing in ETPs?

Risks include market volatility, tracking error, liquidity challenges, issuer risk in the case of ETNs, and amplified price swings in leveraged ETPs.

How are ETPs different from mutual funds?

ETPs trade intraday at market prices like individual stocks, while mutual funds transact only once per day at their Net Asset Value, making trading behaviour and liquidity characteristics different.

Hi! I’m Nupur Wankhede
BSE Insitute Alumni

With a Postgraduate degree in Global Financial Markets from the Bombay Stock Exchange Institute, Nupur has over 8 years of experience in the financial markets, specializing in investments, stock market operations, and project management. She has contributed to process improvements, cross-functional initiatives & content development across investment products. She bridges investment strategy with execution, blending content insight, operational efficiency, and collaborative execution to deliver impactful outcomes.

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