Updated Friday, September 4, 2015 as of 7:13 PM ET

The Changing Complexity of Exchange-Traded Funds

In recent months we witnessed some troubles with ETNs that are worth mentioning. In late March 2012 two ETNs, one issued by Barclays and another issued by Credit Suisse, experienced huge price movements up and then down after the financial issuers of the notes changed their willingness to engage in market-making for the ETNs in question. This led to a supply-and-demand issue that impacted the price of the ETNs, even though the underlying index had not changed significantly. In a resulting FINRA investor alert it was proposed that before trading in the secondary market, investors should compare an ETN's closing and intraday indicative values (IIV) with the market price. If the ETN is trading at a significant premium to its closing value or IIV, investors should consider another product. They should ask if the issuer has suspended the note, and if so why.

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