Exchange traded notes (ETNs), which are unsecured debt securities, are back in the headlines with the banking crisis, since UBS Group’s takeover of Credit Suisse poses questions for what this means for Credit Suisse’s ETNs. Should investors be concerned about these Credit Suisse ETNs? According to Nadig, not really. Everything in the unwind to UBS suggests that the senior debt that these ETNs represent “is going to be just fine.” “The only reason I would be concerned is if you don’t want to have timing exercised against you. I think there’s very little chance that you get wiped,” Nadig said, adding that “it’s much more likely that UBS calls these notes and therefore you just basically get your cash handed back to you at a fair value.” “That’s a fine outcome. You get to do that without transaction costs if you just want to wait,” he said before adding that “if for some reason you care about when you’re going to sell those things, you might want to do that on your own time.” As for why UBS would call these ETNs, Nadig said it’s “just hair.” “These things effectively have to be repapered as UBS debt at some point in this process. I don’t think they’re going to bother doing that,” he said. Since UBS has its own extensive ETN division with ETRACS, Nadig said that “it doesn’t seem that likely that they would want to hang on to this.” “I suspect whoever’s in charge of doing this merger is going to see this as nothing but more hair in the derivatives book, and they’re going to want to clean that up as fast as possible,” Nadig said. “So, I would be a little surprised if they tried to extend these products’ lifetimes, remarket them, [and] rebrand them.” Nadig thinks it will be “much more likely to see them just close down.” He clarified, however, that he doesn’t find anything “inherently evil” about the structure of ETNs. In fact, they have some nice features. For one thing, they can promise any pattern of return, and the bank is forced to deliver it. Plus, they get taxed as prepaid forward contracts as long as they don’t provide currency returns. But ultimately, they’re harmless. “I don’t think there’s any point in shutting them down. Nobody’s getting hurt by these things,” Nadig said. “So, I’m fine that they continue to exist. I don’t think it’s worth bothering to regulate them out of existence.”