An Exchange Traded Product (ETP) is like a leveraged ETF product in the traditional markets, which tracks a certain multiple of the target asset's rise and fall every day. Users do not need to pay for the collateralized assets to achieve the effect of leveraged trading on the underlying assets and the product has no expiration date and no risk of liquidation, but there is a risk that the net value is close to zero. You can identify the multiple of the product and the direction of either long or short, by the name of the ETP.
E.g.
BTC*3: Is 3x long BTC. When the price of the underlying asset increases by 1%, the net value of the product will increase by 3%.
BTC*(-3): Short BTC 3x. When the underlying asset drops by 1%, the net value of the product will increase by 3%.
BTC*(-1): Short BTC is 1x. When the underlying assets fall by 1%, the net value of the product rises by 1%.
Identity Authentication Requirements:
Due to local laws and regulations, the following countries and regions are temporarily unable to trade ETP products, including Belarus, Myanmar, Congo, Cuba, Hong Kong(China), Iran, Iraq, Côte d’Ivoire, Japan, Liberia, North Korea, Sudan, Syria, Turkey, the United States, Zimbabwe
1. ETP pricing mechanism
Net worth calculation:
Net worth = basket position * underlying asset price + basket loan
Basket position = the number of underlying assets held by each ETP
Basket loan = the number of loan coins held by each ETP
For example: BTC*3, if the basket position is 3BTC, the underlying asset price is 100U, and the basket borrowing currency is -200U, then the net value=3*100-200=100U
2. Calculating the actual leverage of an ETP
ETP leverage ratio = basket position * underlying asset price/net value
For example: BTC*3, if the basket position is 3BTC, the underlying asset price is 100U, and the basket borrowed currency is -200U, then the net value=3*100-200=100U
The actual leverage of ETP=3*100/100=3
3. ETP's position adjustment mechanism
An ETP is divided into two types: Regular Position Adjustment and Specific Position Adjustment. Regular Position Adjustment means that the platform will rebalance the position at a fixed time every day to ensure that the ETP is at the agreed multiple of leverage at the beginning of each day. Specific Position Adjustment refers to the temporary adjustment when the actual leverage of ETP exceeds a certain level in a day, and after the adjustment, the leverage is at the agreed multiple.
The specific repositioning process is as follows:
Assuming that each BTC*3 represents 3 BTC and -20,000USDT, when the price of BTC is 10,000USDT, the net value of BTC*3 is 10,000USDT (3*10,000USDT-20,000USDT). In fact, the position of each BTC*3 is 3*10,000USDT. Therefore, its leverage is 30,000USDT/10,000USDT=3 times. When the price of BTC rises to 11,000USDT, the net value of BTC*3 becomes 13,000USDT, and each BTC*3 position becomes 3*11,000USDT which means the leverage is 33,000USDT/13,000USDT=2.54 times, i.e. 3 times lower than the target leverage, so you need to buy BTC to achieve 3 times leverage.
The position to buy is:
target position-current position=3*13,000USDT-33,000USDT=6,000USDT, the number of BTC bought is 6,000/11,000=0.54BTC.
4. ETP’s Subscription and Redemption Mechanism
ETP’s support subscription and redemption, and the cost of subscription and redemption is returned based on the actual transaction results of the underlying assets. It has the characteristics of time uncertainty and cost uncertainty. It is recommended that you participate in the redemption carefully.
ETP subscription and redemption require payment of subscription or redemption fees. Subscription fees are charged based on the subscription rate, subscription quantity and subscription cost; redemption fees are charged based on the redemption rate, redemption quantity and redemption cost.
That is:
Subscription fee = subscription rate * subscription quantity * subscription cost
Redemption fee = Redemption fee rate * Redemption quantity * Redemption cost
5. Holding Limit
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That is, if the amount to be purchased (subscribed) + the current holding amount> the maximum holding amount, the user will not be able to purchase (subscribe) more.
6. Order price limit with NAV
- Buy order: The price set for a limit order can't be higher than 5% of the net value, and the price for a market order can't be higher than 10% of the net value.
- For example: If the net value reports 10 USDT, the price set for a limit order can't be higher than 10.5 USDT (105% of the net value), and the price for a market order can't be higher than 11 USDT (110% of the net value).
- Sell order: The price set for a limit order can't be lower than 5% of the net value, and the price for a market order can't be lower than 10% of the net value.
- For example: If the net value reports 10 USDT, the price set for a limit order can't be lower than 9.5 USDT (95% of the net value) and the price for a market order can't be lower than 9 USDT (90% of the net value).
7. Reverse/Forward Spilt
Huobi Global may carry out the Reverse Spilt or Forward Spilt for some ETPs (Exchange-Traded Products) on a pro-rata basis under certain circumstances to enhance user experience (Before the action, we will inform users via a separate announcement). The Spilt means that there will be a proportionate reduction (Reverse Spilt) or addition (Forward Spilt) in the number of the ETP’s shares, which results in a proportional increase (Reverse split) or decrease (Forward split) in the ETP’s price per share.
For example, when values of ETPs suffer a significant drop impacted by extreme market prices, the Reverse Spilt would be carried out to increase their liquidity and prices.
As an example of how reverse splits work: when UNI*(-2) underwent a 1-5,000 reverse split, the 5,000 shares of UNI*(-2) would be grouped into one share. (The net value of ETPs displayed on the NAV candlestick chart may not be accurate during the execution).
Huobi Global recommends ETPs holders evaluate risks they are exposed to and minimize risks through ETPs' sale or redemption.
Note:
- Trading in ETP comes with high risks due to huge price fluctuations. Please hold it with caution.
- Huobi Global will dynamically adjust the maximum holding of ETP according to the market risk rate.
Risk Reminder: There is a possibility that the NAV of ETP can become zero or the product will be removed due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning, and any other perceived unknown risks associated with ETP