Risk Profiles
So it’s ETNs versus ETFs, right? Not necessarily. SVXY could also be described as an exchange-traded commodity, or ETC, because it owns futures and is structured as a commodity pool. That category would include products that buy oil futures or soy beans -- but perversely not those backed by a vault of gold. Physical metals are dealt with separately.

And the thing is, all of these different products carry different risk profiles. A portfolio of highly liquid stocks is distinct from a pool of commodities or an index of esoteric securities combined into a single note by a bank. However, to many investors they all fall under the seemingly safe rubric of ETFs.

“Investment products should behave the way an investor intuitively understands they’ll behave,” said Martin Small, head of BlackRock Inc.’s U.S. ETF business, called iShares. “There are some critical differences and by using one moniker, like just ‘ETF,’ it doesn’t actually provide adequate navigation capability.”

New Names
Many critics are now keen to refine the term ETF.

BlackRock’s Small encourages differentiating between funds that are approved by the Securities and Exchange Commission prior to launch, and commodity-backed products or notes, which are overseen by the Commodity Futures Trading Commission or banking regulators. The world’s largest ETF issuer, however, doesn’t run any U.S. ETNs, ETCs or leveraged ETPs -- products it wants to rechristen ‘‘exchange-traded instruments.’’

Others, like Dublin, Ohio-based ETP Resources, advocate for a system based on how a product was listed. Under this model, ETFs would splinter into index fund shares (those that track a benchmark) or managed fund shares (those that are actively managed), or even, like the SPDR S&P 500 ETF Trust, portfolio depositary receipts.

All of this may sound like a late-night argument for market nerds, but the differences matter significantly to ordinary investors. Unlike most ETFs, for example, SPY is not overseen by a board and does not have a portfolio manager. There are 10 different types of ETP securities now trading in the U.S., not including ETNs, according to ETP Resources, a data provider run by Jim Simpson, a former associate director of the ETF marketplace at the American Stock Exchange. All of these products have their idiosyncracies.

Regulatory Watershed
Ultimately, though, regulators will make the call on where the divisions lie.

While the SEC only approves funds structured under the Investment Company Act of 1940, its division of corporation finance oversees the disclosure of other ETPs, and its trading and markets division oversees listings. That gives it some control over the amount and type of information that wannabe investors receive.