Exchange-traded transparency

Lyxor has launched London's first exchange-traded note, which unlike its US counterparts is fully collateralised to minimise counterparty risk. But is there a downside to collateralisation? And just how transparent are exchange-traded products when it comes to counterparty risk? John Ferry reports

When Lyxor, the fund management subsidiary of French bank Société Générale and a leading provider of exchange-traded funds (ETFs), decided it wanted to list a product that would give European investors exposure to the price of gold, it faced two problems. First, the Ucits III regulations that govern the European fund market prohibit linkage to a single commodity. The answer? Wrap the product as an exchange-traded note (ETN) rather than an ETF.

Deciding to debut an ETN was the simple part. The

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This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

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