In addition to stocks and cryptocurrencies, you can also invest in various exchange-traded products with BISON. To ensure you know exactly what you are investing in, here you will find all the important terms and functionalities of our so-called ETPs explained simply.
What are ETPs?
Exchange Traded Products (ETPs) are securities that can be easily traded on the stock exchange. ETP is just the umbrella term. This family includes the three subcategories ETFs (funds), ETCs (commodities) and ETNs (debt securities). Their common goal is to replicate a specific index, commodity or underlying asset as precisely as possible.
Please note:
- As with any investment, investing in ETFs is always subject to price change risk due to volatile markets. Losses are also to be expected within the usual market risk of the investment.
- ETCs and ETNs are subject to a high default risk. Since ETCs and ETNs are not considered special assets, the insolvency of an issuer can lead to the loss of your own investment.
ETFs: Exchange Traded Funds (Index Funds)
An ETF replicates the performance of an index (such as the DAX or MSCI World). So with one product you buy a whole basket of securities.
Physical vs. Synthetic: Physically replicating ETFs actually purchase the securities contained in the index. Synthetic replicating ETFs, on the other hand, replicate the index indirectly through a swap agreement with a financial institution. In practice, the swap counterparty of the ETF is often the parent company of the ETF provider. In the swap transaction, it is agreed that the swap counterparty pays the index return including all dividend payments. In exchange, they receive a fee (swap fee) and the return on the securities in the collateral portfolio.
Use of Earnings: There are two ways ETFs handle profits. Distributing ETFs pay out earnings to you regularly. Accumulating ETFs reinvest the profits directly back into the fund, thereby increasing the value of your share.
Costs (TER): The Total Expense Ratio (TER) indicates the annual ongoing costs of an ETF. This fee is already included in the ETF’s price and is not charged separately by BISON.
ETCs: Commodities and Precious Metals (Exchange Traded Commodities)
With ETCs, you can participate directly in the price development of commodities (such as oil or gas) or precious metals (such as gold or silver) without having to store them physically.
Key Information Document: Since commodities are often more complexly secured, you will always find all details about the respective ETC in the associated key information document in the BISON app.
Physical Delivery: Currently, it is not possible with BISON to have precious metals from ETCs (such as EUWAX GOLD II) physically delivered to your home. However, this does not affect the legal and tax structure of your investment with us.
ETNs: Speculate Long and Short (Exchange Traded Notes)
ETNs also replicate the performance of an underlying asset (e.g. indices or currencies), but allow for more flexible strategies.
Long vs. Short: When buying “long” securities, you speculate on rising prices of the underlying asset. If you buy “short” securities, you benefit from falling prices.
ETNs often also include leverage, which significantly increases potential gains but also risks.
Accordingly, a leveraged product can lead to both disproportionate gains and disproportionate losses. All details about the individual long and short securities can be found in the respective key information document.