Exchange-Traded Product (ETP): Definition, Types, and Example

What Is an Exchange-Traded Product (ETP)?

Exchange-traded products (ETPs) are financial securities that track underlying securities, an index, or other financial products. ETPs trade on exchanges similar to stocks, which means they can be bought and sold, and their share prices can fluctuate throughout the trading day. ETP share prices are derived from the underlying investments that they track, such as commodities, stocks, and bonds. Fees are generally lower than those associated with mutual funds, and ETPs offer liquidity.

We’ll explore the types of ETPs, their pros and cons, and provide examples.

Types of Exchange-Traded Products (ETPs)

Exchange-traded products can be benchmarked to myriad investments, including commodities, currencies, stocks, and bonds. They can contain a few or hundreds of underlying investments. Here are the types of ETPs trading on the market.

Exploring Exchange-Traded Funds (ETFs)

An exchange-traded fund (ETF) is a basket of investments that can include stocks and bonds. It usually tracks an underlying index, such as the S&P 500, but can follow an industry, sector, commodity, or even a currency. An ETF’s price can rise and fall just like other investments. ETFs trade throughout the day.

Since ETFs are passively managed, they come with low fees, making them popular with investors. A passively managed ETF may track the S&P 500 index. An ETF that mirrors this index will generally hold all stocks listed on the index, but some funds hold more or less than the index lists, such as Vanguard’s S&P 500 ETF, which held 506 stocks on July 26, 2026, while the S&P 500 listed 503.

In an actively managed fund (which an ETF can also be), the fund manager is responsible for maintaining fund performance by replacing non-performers with better performers, which can lead to higher fees—the managers need to be paid for their time, and there might be some trading fees to pass on. Some ETFs share a combination of both passive and active attributes.

For example, actively managed ETFs are a hybrid investment vehicle that merges actively managed mutual funds with the trading flexibility associated with ETFs.

Introduction to Exchange-Traded Notes (ETNs)

Exchange-traded notes (ETNs), like ETFs, generally track an underlying index and trade on major exchanges. They track unsecured debt securities and are issued as bonds, which pay the return of their original invested amount or principal at maturity and any generated returns.

ETNs do not pay periodic interest payments (called coupon payments). As a result, the likelihood that investors will be paid back the principal and the returns from the underlying index depends on the issuer’s creditworthiness.

Different tax treatments apply to the various types of ETPs. Investors should speak with a tax professional for any potential tax ramifications from investing in ETPs.

Overview of Exchange-Traded Commodities (ETCs)

Exchange-traded commodities (ETCs) are financial instruments designed to offer investors exposure to commodity prices. These instruments can be structured as either ETFs or ETNs. ETCs are traded on stock exchanges, allowing investors to easily access and trade them just like they were individual stocks.

The underlying assets of ETCs typically include a range of commodities such as precious metals, agricultural products, energy resources, or a combination thereof. ETCs let investors buy and sell commodities without holding or owning any of the underlying commodities. As such, investors can capitalize on specific commodities, indexes, or futures contracts without having to store or hold a tangible commodity.

Comparing Exchange-Traded Products and Mutual Funds

Mutual funds are typically priced at the end of the trading day when orders are filled. ETP shares trade like stocks with price movements throughout the day. For example, an investor can place a buy or sell order for an ETF share at a specific price with a broker or buy the ETF in the morning and sell it by the end of the day.

Mutual funds can be purchased and sold during the day, but are not priced until the market closes. ETPs also often carry lower expense ratios than their mutual fund counterparts.

Differences in the bid and ask price (or the buy and sell price) could add to the cost of trading ETPs. Some no-load or no-fee mutual funds, on the other hand, can be bought and sold without any trading commission.

Advantages and Disadvantages of Exchange-Traded Products (ETPs)

Practical Example of an Exchange-Traded Product (ETP)

The largest ETF in the marketplace is the SPDR S&P 500 ETF (SPY), with assets of about $738 billion as of July 2026. The ETF owns shares of 504 stocks listed on the S&P. The top five holdings of the company are:

• NVIDIA
• Apple
• Microsoft
• Amazon
• Alphabet/Google
  

The Bottom Line

ETPs are financial instruments traded on stock exchanges that provide investors with exposure to diverse asset classes such as stocks, bonds, commodities, and currencies. ETPs can be ETFs, ETNs, ETCs, or other vehicles representing structured investment products.

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