Taxing times for ETNs

A number of US dealers have leapt into the exchange-traded note market on the back of the success of Barclays Capital's iPath programme. But new rules proposed last December could alter the tax treatment of these instruments, to the detriment of investors. Will this stymie the growth of the market? Wietske Blees reports

US dealers have been caught by surprise by the success of the exchange-traded note (ETN) market. Ever since the first ETN was launched by Barclays Capital in June 2006, volumes have climbed at breakneck pace, reaching $4 billion as of October 2007, according to the Securities Industry and Financial Markets Association. Keen to build market share, a handful of rival dealers have jumped into the market, with Credit Suisse, Goldman Sachs, Lehman Brothers and UBS all launching ETN programmes of