FSA has published a factsheet on exchange traded products (ETPs). The factsheet is aimed at investment advisers and explains:

  • the key features of ETPs and the differences between them;
  • the investment strategies ETPs use to generate a return, and the risks these strategies pose to investors;
  • how collateral and third party involvement create risks to an ETP investment;
  • how ETPs are traded and the risks involved in trading; and
  • the potential for conflicts of interest in ETP structures. FSA says the retail market for ETPs is currently small, but is likely to grow.

FSA studies have found competing views on the risks ETPs pose and has published the factsheet to raise awareness of them. It may revise the sheet in the light of responses to ESMA's current consultation on these products. (Source: FSA Publishes ETP Factsheet)