The building block for baskets
ETRFs are fully fungible contracts aiming to replicate the performance of an OTC equity total return swap (TRS). ETRFs represent the theoretical borrowing of cash to purchase the underlying equity at trade date, assuming it’s held till expiry, i.e., there is immediate exposure to the cash leg of the underlying equity. The holder of a long position will therefore receive the returns associated with holding the cash equity – against which they will pay the financing associated with this purchase. The cost of financing is comprised of the overnight funding rate and the determined traded "spread". This traded spread represents the additional rate, over the overnight benchmark funding rate, required by the seller to provide the returns of the cash equity until expiry.