This is the biggest lesson investors can learn from recent exchange-traded note liquidations (via ETFEdgeCNBC)
That's the biggest lesson investors can learn as the U.S. stock market's historically volatile activity leads to liquidations and de-listings of certain exchange-traded notes, or ETNs, Dave Nadig, chief investment officer and director of research at ETF Trends, told CNBC'sA small, high-yielding corner of the market that's now in focus in a big way, ETNs are quite different from exchange-traded funds, or ETFs, as similar as they may sound, Nadig said.
"It's coming generally from a bank, like a Credit Suisse or a Barclays, and it's promising a certain pattern of returns until that debt matures. These get used primarily for exposures that are difficult to put in a fund wrapper like, say, inverse volatility or leveraged volatility or other interesting patterns of return," Nadig said.
"What happens is these [factors such as inverse volatility,] have to be offset by some bank's risk management desk, and when they lose their appetite to take more of the hedge against that ETN, they really have no option but to close that ETN or de-list it," Nadig said. "We've seen some de-listings, we've seen some closures as these banks are unwilling to keep providing that exposure.
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