What are ETPs and how do they work?

If you have not been living under a rock, you would know that by now, markets no longer run on phone calls and gut feelings. They run on screens, speed, and systems that never sleep. If “call your broker” still sounds normal, you are already late.

 

You have also probably heard the term ETP tossed around on finance socials or in market news, but what exactly are exchange-traded products, and why should you care in 2026?

 

Well, what used to be a side tool is now doing the heavy lifting in modern portfolios. Big players use them because they are liquid, transparent, and easy to move when markets shift.

 

BlackRock data shows global ETPs pulled in a record $2.3 trillion in 2025, blowing past the $1.8 trillion set just a year earlier. Add in regulated digital asset products, and you have got a system that looks nothing like the old playbook.

 

What is an ETP?

In the simplest terms, an exchange-traded product (ETP) is a financial instrument that tracks the performance or value of an underlying asset or benchmark and trades on a stock exchange during regular market hours. Think of it as a wrapper that lets you gain exposure to assets without owning them directly.

 

ETPs are not a single product type, they are a category. People often use “ETF” and “ETP” as if they mean the same thing, but that shortcut can get expensive. ETPs include the examples below:

• Exchange-traded funds (ETFs) hold a basket of assets like stocks, bonds, or even crypto and aim to reflect the performance of an index or sector.

• Exchange-traded notes (ETNs) are unsecured debt instruments issued by financial firms, linking payoff to an index but without holding the underlying assets.

• Exchange-traded commodities (ETCs) offer exposure to commodities or currencies through tradable securities.

Each comes with different risks, tax treatment, and legal structure, but they all share one feature: they trade on exchanges like stocks, offering flexibility and transparency during normal market hours.

 

The appeal is quite direct: ETPs give market exposure to an asset, index, or strategy without the hassle of owning or managing the underlying pieces.

 

According to the data from our research, U.S. ETFs pulled in more than $1.48 trillion in net inflows in 2025, while mutual funds saw outflows topping $551 billion. The message is clear: the old models are not gone, but they are no longer the default.

 

How do ETPs actually work?

At first glance, ETPs look like stocks, but under the hood they are doing a bit more.

Creation and redemption

ETPs are created and redeemed by authorized participants (APs). The AP is the institutional engine, usually a giant like Goldman Sachs or JPMorgan, that keeps the ETP’s price aligned with the actual value of its assets.

 

When demand for an ETP rises, APs deliver the underlying assets to the issuer in exchange for new ETP shares.

 

When demand falls, they redeem shares for those assets. This mechanism helps keep the ETP’s market price aligned with the net asset value (NAV) of the assets it tracks.

Intraday trading

Unlike mutual funds that price once per day, ETPs trade throughout the day on an exchange. That means you can buy and sell them anytime during market hours, responding to news or price moves as they happen.

Price discovery and liquidity

Market makers and traders help provide liquidity so you can enter and exit positions without huge price swings. This intraday liquidity is one reason ETPs are popular with both retail and institutional participants.

 

Why ETPs matter

Simpler exposure to complex assets

One major benefit is access. Not everyone wants to set up a crypto wallet, handle private keys, or navigate futures markets. ETPs let you get exposure to assets like Bitcoin or gold through familiar brokerage accounts.

Transparency and regulation

In the U.S., ETPs must register and disclose information regularly with the Securities and Exchange Commission (SEC), which helps protect traders through mandated reporting and oversight. This does not eliminate risk, but it does bring structure compared with holding assets directly.

Liquidity and flexibility

Because they trade like stocks, ETPs benefit from most major trading tools: limit orders, stop orders, short selling, and margin trading. That is a level of flexibility traditional mutual funds do not offer.

 

Spot vs. synthetic: How ETPs track value

There are 2 main ways ETPs can follow the price of what they track:

• Physical (spot) replication: The ETP buys and holds the actual asset (e.g., Bitcoin), and the ETP’s price moves along with that asset. This is common in modern spot Bitcoin ETPs.

• Synthetic replication: The ETP uses derivatives like futures to mimic price movement without holding the asset directly. This approach is more common with some commodity or leveraged ETPs.

Physical replication tends to offer closer tracking of the underlying asset, while synthetic structures carry extra risk, such as issuer or credit risk.

 

Do ETPs have risks?

Sure. ETPs are not magic. They simply offer a way to trade exposure:

• Market risk: If the underlying asset loses value, so does the ETP.

• Tracking error: Sometimes the ETP does not perfectly match the asset’s price movement, especially with derivatives.

• Issuer risk: For ETNs and some leveraged products, you are relying on the issuer’s ability to pay.

These are not dealbreakers, but they are worth knowing before you dive in.

 

Why ETPs are big in crypto now

You have likely seen news about Bitcoin and Ether ETPs hitting the market. Just last March in Europe, BlackRock launched its first Bitcoin ETP that trades on Xetra and Euronext platforms, offering broad exposure without wallets or custody hassles.

 

Regulators are also paying attention. The SEC’s Investor Bulletin highlights that crypto ETPs provide exposure through futures or spot holdings, but they warn about volatility and the need for disclosure.

 

With mainstream firms backing these products, crypto ETPs are one of the fastest-growing intersections of traditional finance and digital assets. They offer a bridge for money that prefers regulated wrappers over direct market exposure.

 

So… What’s the big idea?

At their core, ETPs democratize access to markets that might otherwise be hard to reach. They bundle up exposure to assets, indexes, or strategies you care about and let you trade them like a stock. You do not have to own the underlying asset directly. You just ride its performance.

 

In a world where markets move fast and access matters, ETPs give everyone, from institutions to regular traders, a way in without starting from scratch.