ETP or ETF: What sets them apart and what happens in an insolvency?

In Switzerland, the difference between an ETP and an ETF lies in the legal form. It determines what happens to the money if the provider goes bankrupt: according to SIX, an ETF is an investment fund and a Swiss ETP is a debt security. With a Swiss investment fund, the fund assets are segregated in the bankruptcy of the fund management company, so they are not distributed to its creditors. The claims of the fund management company under Art. 38 FinIA (remuneration, reimbursement of expenses) are reserved and are paid from the fund assets. With an ETP as the Swiss exchange SIX understands it, investors instead hold a claim against the issuer. Data as of 25 October 2026.

What is the difference between an ETP and an ETF?

Both products are traded on the exchange. The difference lies behind them.

Holding fund units therefore means holding a share in a pool of assets. Holding an ETP as a debt security means holding a claim against the issuer. Supervision also differs. According to SIX, ETPs do not require authorisation from FINMA. ETFs, by contrast, are collective investment schemes under the Collective Investment Schemes Act (CISA; German: KAG). FINMA is the Swiss Financial Market Supervisory Authority.

For issuer risk in certificates, see also the article Lehman certificates 2008.

What happens if the provider of an ETF goes bankrupt?

A Swiss investment fund is run by a fund management company. According to FINMA, it is a public limited company with its registered office in Switzerland and requires authorisation from FINMA.

If the fund management company goes bankrupt, the fund assets are segregated for the benefit of investors under Art. 40 para. 1 of the Financial Institutions Act (FinIA), meaning they are treated separately. They are not distributed to the creditors of the fund management company. Debts of the fund management company that do not arise from the fund contract cannot be set off against claims of the fund.

One reservation applies. The fund management company is entitled to the remuneration provided for in the fund contract and to reimbursement of its expenses. This is governed by Art. 38 FinIA. These claims are paid from the fund assets. The law excludes any personal liability of investors.

The segregation concerns the bankruptcy of the fund management company. The value of the units still depends on the investments in the fund and can fall.

What happens if the issuer of an ETP goes bankrupt?

Anyone holding an ETP as a debt security is one of the creditors in bankruptcy. According to the Canton of Fribourg, Art. 219 of the Debt Enforcement and Bankruptcy Act (DEBA; German: SchKG) lists the preferential rights of the first and second class exhaustively. A preferential right is a higher ranking in bankruptcy. Claims without preferential status rank in the third class; how an ETP claim is ranked in an individual case depends on the product. How much will be paid out on a claim cannot be said in advance.

A numerical example makes the differences tangible.

What does collateralisation change?

Collateralisation exists so that an issuer default has less impact. According to SIX, Swiss ETPs must be fully collateralised to reduce the default risk. A 2025 SIX blog post mentions 100% with real assets or collateral, deposited with an independent third party. Both statements come from the exchange itself.

Where collateral is held under Triparty Collateral Management (TCM), a procedure in which a third party manages the collateral, SIX states that it is pledged to SIX SIS AG (SIX announcement of 30 November 2022). A pledge is a form of security that creditors may access if the debtor does not pay. According to SIX, SIX Repo AG, acting as collateral agent (the body that keeps track of the collateral), checks the collateral daily. SIX describes this for the TCM procedure; it does not automatically apply to every ETP. TCM is meant to reduce how hard an issuer default hits investors.

SIX names one limit explicitly: collateralisation reduces issuer risk but does not protect against losses caused by a falling underlying. The underlying is the investment to which the product is linked, such as the gold price. Depending on the case, open points include the value of the collateral on realisation, the duration and the currency.

What applies to foreign funds and in Germany?

Foreign funds can also be traded in Switzerland. For this, SIX requires a legally valid authorisation for distribution in or from Switzerland. The EU Directive 2009/65/EC (UCITS, uniform EU rules for investment funds) contains a rule on the depositary in Art. 22 para. 8. The depositary holds the fund assets in safekeeping: if it, or a third party located in the Union to which custody has been delegated, goes bankrupt, the assets held in custody may not be distributed to its creditors.

In Germany, contractual funds are special funds (Sondervermögen), that is, assets kept separate from other assets (§ 1 para. 10 KAGB, German Investment Code). When insolvency proceedings are opened, the management company's right of administration lapses, and the special fund does not form part of the insolvency estate (§ 99 KAGB). The insolvency estate is the pool of assets distributed to creditors in the proceedings.

The article on ETPs, ETFs and the rise of crypto markets gives an overview of the market for exchange-traded products.

The article Reading a factsheet explains what information a factsheet contains.

What are the risks?

• ETF: Segregation under Art. 40 FinIA concerns the bankruptcy of the fund management company of a Swiss investment fund. The value of the units depends on the investments in the fund. Losses up to a total loss are possible.
• ETP as a debt security: If the issuer defaults, a claim remains. How much is paid out on it is uncertain, and a total loss is possible. Further risks that SIX names for Swiss ETPs are product structure, liquidity, currency and costs.
• Collateralisation: According to SIX, it reduces the issuer's default risk but does not rule it out. It does not protect against losses from a falling underlying.
• Foreign funds: A different law from Swiss law may apply.
• Numerical example: The values are chosen freely. Real bankruptcy proceedings unfold differently.

This article is a general overview and does not constitute investment or legal advice. The situation may differ in an individual case.

Conclusion

The difference between a Swiss ETP and an ETF shows in the legal form when the provider goes bankrupt: according to SIX, an ETF is an investment fund and a Swiss ETP is a debt security. With a Swiss investment fund, the fund assets are segregated under Art. 40 FinIA. The claims of the fund management company under Art. 38 FinIA (remuneration, reimbursement of expenses) are reserved and are paid from the fund assets. With a debt security, there is a claim against the issuer. In bankruptcy, claims without preferential status rank in the third class. According to SIX, collateralisation reduces the issuer's default risk but does not protect against a falling underlying.