An exchange-traded security (debt security) that is backed by the creditworthiness of the issuer and tracks the performance of an underlying index. It is a type of unsecured debt security that tracks an underlying market index and is tradable on a exchange like a stock market. Exchange-traded notes (ETNs) are designed to provide access to illiquid markets, while giving the holder the advantage of generating virtually no short-term capital gain taxes.

In concept, this security is similar to an exchange-traded fund (ETF) as both trade on a exchange and track a benchmark or index. However, an ETN is not an independent pool of securities, but rather a debt security issued by a financial institution. The issuer promises to pay ETN holders the return on an index over a specific period of time and pay back the principal amount of the security at maturity. The ETF holders would be exposed to any risks associated with the issuer, particularly its inability to pay the promised returns and/ or pay back the principal amount, as is the case if the issuer goes bankrupt.