Understanding iPath ETNs

iPath® Exchange Traded Notes ( ETNs) are innovative investment products issued by Barclays Bank PLC that seek to provide investors with a way to access the returns of a market or strategy, less investor fees and costs.

An investment in iPath ETNs involves significant risks, including possible loss of principal, and may not be suitable for all investors. For additional information regarding risks associated with the ETNs, please see "Selected Risk Considerations" below.

Exchange Traded Notes (ETNs) have become increasingly popular investment instruments, providing single-trade access to hard-to-reach exposures including commodities, volatility and other investment strategies. An ETN is a debt security that can be bought and sold on an exchange. An ETN provides investors with a return linked to the performance of an underlying index, less fees and applicable costs.

Structure of iPath ETNs

iPath ETNs can be characterized by the following key features:

FeatureDescription
Payment at maturity If you hold your ETNs to maturity, you will receive a cash payment per ETN at maturity that is based on the performance of the underlying index from the applicable inception date to the applicable final valuation date, less fees and applicable costs.
Redemption prior to maturity Investors can redeem a large block of iPath ETNs, at least 20,000, 25,000 or 50,000 ETNs (depending on the series) of the same series at one time, directly to the issuer, Barclays Bank PLC, on any redemption date, subject to the procedures described in the relevant product prospectus1. A redemption charge may apply for certain series of iPath ETNs. The redemption charge is a one-time transaction charge imposed only in the case of early redemption for certain iPath ETNs and is intended to allow the issuer to recoup brokerage and other costs incurred in connection with an early redemption (although proceeds from the charge may be more or less than such costs). Investors transacting in the secondary market will not incur a redemption charge for any series of iPath ETNs.
Interest Payments Interest will not be paid during the term of most iPath ETNs. iPath Global Emerging Markets Strategy (GEMS) ETNs are designed to pay a monthly coupon. iPath S&P MLP ETNs are designed to pay a quarterly coupon.
No Dividend Distributions The iPath ETNs currently available do not make dividend distributions.
Investor fee and additional costs The investor fee is subtracted on a daily basis from the closing indicative note value of each iPath ETN at a cumulative annual rate equal to the Investor Fee Rate. Because the investor fee and other applicable costs reduce the amount of an investor's return at maturity or upon redemption, if the level of the underlying index is insufficient to offset the negative effect of the investor fee and other applicable costs. Because the ETNs are subject to an investor fee and other applicable costs, the return of the ETNs will always be lower than the total return on a direct investment in the index components. For a more complete description of how the investor fee and other applicable costs are calculated, please see the applicable product page and pricing supplement. Additional costs, such as rolling costs, may apply to certain iPath ETNs. Please refer to the relevant prospectus for more information.
No principal protection The iPath ETNs do not offer any principal protection and investors may lose some or all of their principal. Investors will receive a return based on the performance of the underlying index to which a particular series of iPath ETNs is linked, less investor fees and any other applicable costs. Accordingly, if the level of the underlying is insufficient to offset the negative effect of the investor fee and other applicable costs, investors will lose some or all of their investment at maturity or upon redemption, even if the value of such index has increased or decreased, as the case may be. The ETNs are riskier than ordinary debt securities and have no principal protection.
Ratings The iPath ETNs are not rated, but are backed by the credit of Barclays Bank PLC. Credit ratings relate solely to the issuer, Barclays Bank PLC, and not to the ETNs. Credit ratings are subject to revision or withdrawal at any time by the assigning rating organization, which may have an adverse affect on the market price or marketability of the iPath ETNs.
Senior, unsecured debt The iPath ETNs are senior, unsecured debt securities of Barclays Bank PLC.  Senior: in the event of default of insolvency, investors in senior debt are repaid before all debts subordinated to the senior debt and all equities.  Unsecured: there is no direct collateral asset on which senior debt investors have a claim in case of default or insolvency. 
No Voting rights Because the iPath ETNs are debt securities, they do not have any voting rights.

1 The issuer may from time to time in its sole discretion reduce, in part or in whole, the minimum redemption amount. Any such reduction will be applied on a consistent basis for all holders of units at the time the reduction becomes effective.

Differences and similarities between ETNs and Exchange Traded Funds (ETFs)

Both ETNs and ETFs provide investors access to the returns of various market benchmarks. However, iPath ETNs are debt securities issued by Barclays Bank PLC, whereas ETFs are typically registered investment companies collateralized by an underlying portfolio of securities. Other differences and similarities are noted in the following chart:

  ETNETF
Liquidity Daily on exchange, subject to trading market Daily on exchange, subject to trading market
Registration Securities Act of 1933 Investment Company Act of 1940
Recourse Issuer credit Portfolio of securities
Principal Risk Market and issuer risk Market risk
Tracking Error1 Minimal to none Low
Tax Issues Capital gains only realized upon the sale, redemption or maturity of the ETN.  No dividend distributions.  Interest paid only on ETNs designed to pay a periodic coupon.  Significant aspects of the tax treatment of ETNs are uncertain.  You should consult your tax advisor about your own situation. Potential exposure to capital gains and losses of portfolio, although creation/redemption mechanism works to minimize this. Dividends and interest income passed through to shareholders.
Transparency Performance of ETNs generally depends on the return of the underlying index, less applicable fees and costs. There is typically not an underlying portfolio of securities that investors have recourse to. Performance of ETFs generally depends on the return on a portfolio of securities or instruments held by the fund, less applicable fees and costs. Holdings of the fund are disclosed by the fund sponsor.
Accessibility Access through any brokerage account (certain firms may have restrictions on product availability on their platforms) Access through any brokerage account (certain firms may have restrictions on product availability on their platforms)
Institutional size redemption Daily to the issuer, subject to minimum redemption amount Daily via custodian, subject to minimum redemption amount
Short sales 2 Yes, on an uptick or a downtick Yes, on an uptick or a downtick

1 Tracking error refers to the under/over performance differential of an ETN versus its underlying index over a given time period, after accounting for the ETN's fees and costs. One cannot invest directly in an index.

2 With short sales, an investor faces the potential for unlimited losses as the security's price rises.

iPath Roles

Barclays Bank PLC and its subsidiary undertakings (taken together, the "Group") is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. The Group operates in many countries around the world. The whole of the issued ordinary share capital of Barclays Bank PLC is beneficially owned by Barclays PLC, which is the ultimate holding company of the Group.

Barclays Capital Inc. acts as the issuer's agent in connection with the distribution of the iPath ETNs. Barclays Capital Inc. is an affiliate of Barclays Bank PLC and is a registered US broker-dealer regulated by the SEC and the FINRA.

Regulation of iPath ETNs

iPath ETNs are registered under the Securities Act of 1933. They are not regulated by the Commodity Futures Trade Commission (CFTC), and you do not need a Series 3 License to sell them. However, futures contracts notionally underlying the relevant market index may be regulated by the CFTC.

 

An investment in the iPath ETNs described herein (the ETNs) involves risks, including possible loss of principal, and may not be suitable for all investors.  Selected risks are summarized here and select product specific risk factors are summarized under Select Risk Considerations on the relevant product pages, but we urge you to read the more detailed explanation of risks described under Risk Factors in the applicable product prospectus.

You May Lose Some or All of Your Principal: The ETNs are exposed to any change in the level of the underlying index, or the Volume Weighted Average Price (VWAP) level, in the case of the iPath® S&P MLP ETN, between the inception date and the applicable valuation date.  Additionally, if the level of the underlying index or the VWAP level, is insufficient to offset the negative effect of the investor fee and other applicable costs, you will lose some or all of your investment at maturity or upon redemption, even if the value of such index or the VWAP level has increased or decreased, as the case may be.  Because the ETNs are subject to an investor fee and other applicable costs, the return on the ETNs will always be lower than the total return on a direct investment in the index components.  The ETNs are riskier than ordinary unsecured debt securities and have no principal protection.

Credit of Barclays Bank PLC: The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party.  Any payment to be made on the ETNs, including any payment at maturity or upon redemption, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due.  As a result, the actual and perceived creditworthiness of Barclays Bank PLC will affect the market value, if any, of the ETNs prior to maturity or redemption.  In addition, in the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the ETNs.

A Trading Market for the ETNs May Not Develop: Although the ETNs are listed on a U.S. national securities exchange, a trading market for the ETNs may not develop and the liquidity of the ETNs may be limited, as we are not required to maintain any listing of the ETNs.

No Interest Payments from the ETNs: You may not receive any interest payments on the ETNs.

Restrictions on the Minimum Number of ETNs and Date Restrictions for Redemptions: You must redeem at least 20,0000, 25,000 or 50,000 (depending on the series) ETNs of the same series at one time in order to exercise your right to redeem your ETNs on any redemption date.  You may only redeem your ETNs on a redemption date if we receive a notice of redemption from you by certain dates and times as set forth in the product prospectus.

Uncertain Tax Treatment: Significant aspects of the tax treatment of the ETNs are uncertain. You should consult your own tax advisor about your own tax situation.

Barclays Bank PLC has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates.  Before you invest, you should read the prospectus and other documents Barclays Bank PLC has filed with the SEC for more complete information about the issuer and this offering.  You may get these documents for free by visiting www.iPathETN.com or EDGAR on the SEC website at www.sec.gov.  Alternatively, Barclays Bank PLC will arrange for Barclays Capital Inc. to send you the prospectus if you request it by calling 1-212-528-7990, or you may request a copy from any other dealer participating in the offering.

The ETNs may be sold throughout the day on the exchange through any brokerage account. Commissions may apply and there are tax consequences in the event of sale, redemption or maturity of ETNs.

© 2016 Barclays Bank PLC.  All rights reserved.  iPath, iPath ETNs and the iPath logo are registered trademarks of Barclays Bank PLC.  All other trademarks, servicemarks or registered trademarks are the property, and used with the permission, of their respective owners.

NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

 

Contact us

For all enquiries, please instruct your broker/advisor/custodian to email us at etndesk@barclays.com

Barclays Capital Inc. acts as the issuer's agent in connection with the distribution of the iPath ETNs. Barclays Capital Inc. is an affiliate of Barclays Bank PLC and is a registered US broker-dealer regulated by the SEC and the FINRA.