1. ETF’s and ETN’s

2. Exchange Traded Funds (ETF)
An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds or a basket of assets like an index fund.
An ETF is a type of fund that owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares.
The actual investment vehicle structure (such as a corporation or investment trust) will vary by country, and within one country there can be multiple structures that co-exist. Shareholders do not directly own or have any direct claim to the underlying investments in the fund; rather they indirectly own these assets.

3. Exchange Traded Funds (ETF)
ETF shareholders are entitled to a proportion of the profits, such as earned interest or dividends paid, and they may get a residual value in case the fund is liquidated.
The ownership of the fund can easily be bought, sold or transferred in much the same was as shares of stock, since ETF shares are traded on public stock exchanges.

4. Exchange Traded Funds (ETF)
ETF trades like a common stock on a stock exchange.
ETFs experience price changes throughout the day as they are bought and sold.
ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.

5. ETF Creation and Redemption
The supply of ETF shares is regulated through a mechanism known as creation and redemption.
The process of creation/redemption involves a few large specialized investors, known as authorized participants (APs).
Creating an ETF, however, does not involve cash.

6. ETF creation
The process begins when a prospective ETF manager (known as a sponsor) files a plan with the securities commission to create an ETF. 
Once the plan is approved, the sponsor forms an agreement with an authorized participant who is empowered to create or redeem ETF shares. (In some cases, the authorized participant and the sponsor are the same.)
The Aps borrows stock shares, places those shares in a trust and uses them to form ETF creation units.
The creation units are bundles of stock varying from 10,000 to 600,000 shares, but 50,000 shares is what's commonly designated as one creation unit of a given ETF.
Then, the trust provides shares of the ETF, which are legal claims on the shares held in the trust (the ETFs represent tiny slivers of the creation units), to the authorized participant. Because this transaction is an in-kind trade — that is, securities are traded for securities—there are no tax implications.
After the Aps receives the ETF shares, they are sold to the public on the open market just like stock shares.
When ETF shares are bought and sold on the open market, the underlying securities that were borrowed to form the creation units remain in the trust account. The trust generally has little activity beyond paying dividends from the stock, held in the trust, to the ETF owners, and providing administrative oversight. This is because the creation units are not impacted by the transactions that take place on the market when ETF shares are bought and sold.

7. ETF Redemption
When investors want to sell their ETF holdings, they can:
sell the shares on the open market - is generally chosen by most individual investors.
gather enough shares of the ETF to form a creation unit, and then exchange the creation unit for the underlying securities - is generally only available to institutional investors due to the large number of shares required to form a creation unit. When these investors redeem their shares, the creation unit is destroyed and the securities are turned over to the redeemer.

8. ETF Creation and Redemption: APs
APs are large financial institutions with a high degree of buying power, such as market makers that may be banks or investment companies. Only APs can create or redeem units of an ETF.
When creation takes place, an AP assembles the required portfolio of underlying assets and turns that basket over to the fund in exchange for newly created ETF shares.
Similarly, for redemptions, APs return ETF shares to the fund and receive the basket consisting of the underlying portfolio. Each day, the fund’s underlying holdings are disclosed to the public.

9. ETFs typology
Physical-based ETFs: Such funds invest directly in physical commodities like gold, crude oil, or grains, while bearing the additional cost of transport, storage, and security.
Equity-based ETFs: These invest in stocks of commodity-based companies, such as shares in oil companies like Royal Dutch Shell . Such ETFs avoid the hassles of commodity storage and operational issues. However, they carry stock-specific and overall market risks.
Futures-based ETFs: These invest in commodity futures contracts, along with a pre-selected portfolio of money market instruments. Such futures-based ETFs never take possession of the physical commodity, but keep the capital moving from one basket of futures contracts to another. Since futures have expiry dates, futures rollover is an integral part of the business. The ETF investor doesn’t have direct exposure to the underlying commodity, but simply deals in cash in terms of purchase or redemption of ETF units.

10. Advantages of ETFs
By owning an ETF, investors get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share (there are no minimum deposit requirements).
The expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, it’s paid the same commission to the broker that is paid on any regular order.
Potential for favorable taxation on cash - flows generated by the ETF, since capital gains from sales inside the fund are not passed through to shareholders.

11. Exchange Traded Notes - ETN
Exchange-traded notes (ETNs) are a type of unsecured, unsubordinated debt security.
The unsubordinated debt security is a loan or security that ranks above other loans or securities with regard to claims on assets or earnings, known as a senior security. In the case of default, creditors with unsubordinated debt would get paid out in full before the junior debt holders. Therefore, unsubordinated debt is less risky than subordinated debt.
First issued by Barclays Bank PLC based on the performance of a market index minus applicable fees, with no period coupon payments distributed and no principal protections.
Similar to exchange-traded funds (ETFs), ETNs are traded on a major exchange, during normal trading hours.

12. Exchange Traded Notes - ETN
The market price of ETNs depends on how the underlying index is performing.
ETNs do not show ownership in a pool of securities; they simply track the performance of a specific market index.
When the ETN matures, the financial institution takes out fees, then gives the investor cash based on the performance of the underlying index.

13. Risks Involved with ETNs
The repayment of principal depends somewhat on how the underlying index performs.
If the index either goes down or does not go up enough to cover the fees involved in the transaction, the investor will receive less at maturity than what he originally invested.
The issuer of the ETN may be unable to pay the principal or extra return on time or may default on the loan.
Political, economic, legal or regulatory changes or natural disasters may affect the financial institution's ability to pay ETN investors on time.
Because the secondary market may be limited, and because the underlying index may change rapidly, selling an ETN before maturity may result in a large loss or gain.

14. References Shobhit Seth, Futures Exchange-Traded Funds
Commodities Trading: An Overview,