Overview of RMB Exchange Traded Notes (RMB ETNs)
What is an RMB ETN?
RMB ETNs have been introduced to open up the listed product universe to investors – offering easy access to a range of products or asset classes that were previously difficult to access.
When an investor buys an RMB ETN, FirstRand Bank Limited commits to redeem the value of the note upon maturity. RMB ETNs can either be held to maturity or sold on the secondary market via the JSE.
RMB ETNs are traded on the JSE exactly like a share. Like Exchange Traded Funds (ETFs), RMB ETNs closely track the return of a benchmark index or strategy. But unlike ETFs, the underlying pool of assets is owned by FirstRand, and not held in a segregated fund or Collective Investment Scheme. When buying RMB ETNs, an investor does not buy a stake in the underlying assets but rather a commitment from FirstRand Bank Limited that upon maturity the cash value of the ETN will be paid out to the holder of the ETNs.
Benefits and Risks of an ETN
Benefits of trading and investing in RMB ETNs include:
- Access to new markets and strategies, allowing investors to diversify their portfolios
- Liquidity can be bought or sold at any point in time during normal JSE trading hours - RMB is the market maker of the RMB ETNs
- Exposure to a portfolio of products through a single investment
- Convenience of trading a share - without the complications of trading futures or physical commodities
- Transparent exposure to an index that is calculated and published daily
Risks of trading and investing in RMB ETNs include:
- Investing in RMB ETNs may result in a loss for the investor
- RMB ETNs are exposed to the credit risk of FirstRand Bank Limited
- RMB ETNs could encompass potentially unprofitable trading strategies
The risks identified above are not exhaustive. You should also review carefully the related "Risk Factors" section of the applicable pricing supplement for each product.
Payment at maturity
If you hold your RMB ETNs to maturity, you will receive a cash payment at maturity that is linked to the current price of the corresponding index or strategy, less investor fees. No physical delivery applies.
Liquidating prior to maturity
You can liquidate RMB ETNs before their maturity date in two ways:
- Trade them on the Johannesburg Stock Exchange during normal trading hours
- Redeem a large block of the particular RMB ETN, directly to FirstRand Bank Limited, subject to certain procedures and conditions. A redemption charge may apply.
The investor fee is specific to each RMB ETN. It is calculated cumulatively based on the performance of the RMB ETN and increases each day based on the value of the RMB ETN. For a more complete description of how the investor fee is calculated, please refer to the Applicable Pricing Supplement.
No principal protection
Investors will receive a cash payment linked to the performance of the corresponding index or strategy, less investor fees. No principal protection or guarantees are offered.
RMB ETNs are not independently rated, and rely on the credit of FirstRand Bank Limited. Any change in the rating of FirstRand could affect the market price of the RMB ETN.
Because the RMB ETNs are debt securities, they do not have any voting rights.
RMB ETNs are senior, unsecured, unsubordinated debt securities issued by FirstRand Bank Limited.