ETP: funds exchanged in Switzerland with an alternative to the stock exchange
While the whole world is waiting for the decision of the US SEC on Bitcoin ETFs, Switzerland has found another solution. The financial regulator of the country, FINMA, confirmed that the product will be traded on the stock exchange Main stock exchange in Switzerland tomorrow, November 21st. The ETP will track five best cryptocurrencies.
What are ETPs and what differentiates them from ETFs?
PTE they are traded on a stock exchange and are approved by the Swiss exchange called Six Swiss Exchange. The ETP was released by Amun AG, based in Zug, and will follow the five largest digital currencies – Bitcoin, XRP, Ethereum, Bitcoin Cash and Litecoin.
Despite the fact that Amun's website clearly states that this is only a ETPmany believe it is actually a long-awaited ETF. However, these are two very different products, which do not fall into the same category. FINMA, the regulator of the country, commented that it is important to separate the two and understand why they are so different. The main reason is the fact that PTEs are not subject to CISA (Collective Investment Law). As a result, they are not controlled by FINMA.
Alternatively, ETFs would be subject to CISA, as they are funds that are traded and that normally track the performance of an index. The same was confirmed by the Six Swiss Exchange, whose spokesman added that this product will begin trading on 21 November. They also said that ETPs are similar to ETFs in a way they trade in a multi-product segment. However, they are not funds in a legal way. Instead, they are collateralised and interest-free bearer debt securities. They can replicate an underlying asset that usually comes from the raw materials sector.
Six Swiss Exchange took a further step forward in trying to explain Switzerland's passive financial products by clarifying difference between ETF and ETP. Their paper also shows that ETPs will include ETNs (exchange traded securities) and ETCs (exchange traded products).
While ETN they are a kind of debt security that can be traded in exchanges with a promise of returns linked to a market index, ETCs provide exposure to various commodities. Furthermore, there are also several risks involved with ETF and ETP. ETFs are separate asset pools that can be separated in the event of supplier failure, which means that there is no issuer risk.
The public does not include the ETPs
In September 2018, it became evident that PTE I'm not properly understood According to XBT Provider, its ETPs have been massively misunderstood, which eventually led the SEC to suspend trade in the company's two products: Bitcoin Tracker One and Ether Tracker One. The suspension was presumably caused by inconsistencies in product descriptions.
The SEC he claimed that these are ETF, which have not yet been approved, along with other public sources describing tools such as ETN. Furthermore, the regulator declares that it has been defined as "non-equity-related certificates" by the issuer and that they are not principally protected, nor have interests. Finally, the SEC announced that there is a clear lack of accurate information on these investment vehicles, which confuses the public. As such, their trading will be suspended for now.