The end for ETNs?

The bankruptcy of Lehman Brothers has hammered home the importance of counterparty risk, fuelling dire predictions for the future of exchange-traded notes. But while some product issuers are retreating from the area, others remain optimistic. By Mark Pengelly

Counterparty risk has fast become a dominant market issue for investors of all types. Before the outbreak of the current financial crisis, worries about a counterparty defaulting were largely confined to banks when dealing with their clients. Now, it has become a widespread concern - particularly among investors in exchange-traded notes (ETNs).

This is partly the result of the collapse of Lehman Brothers, which made the worst counterparty fears of market participants a reality. The implosion of