It seemed like a good idea at the time. Building on the success of the $600bn exchange traded fund (ETF) industry, and investors’ craving for exposure to increasingly arcane markets, several banks began offering ETNs (exchange traded notes) in the past two years, launching 93 to date. Though the acronyms are nearly identical, the devil is in the details. ETFs hold a basket of actual assets. ETNs, on the other hand, are non-interest bearing debt underwritten by the issuer, the price of which is tied to movements in an index.

Investors were understandably aghast this week when a number of ETNs began precipitous declines that had nothing to do with the markets they were supposed to track. For example, one that speculated on a rise in the Chinese renminbi plunged by over 25 per cent on Wednesday while the currency made its usual glacial move. Owners who had read the fine print – and a few apparently bothered to do so – would have noticed that the notes were a direct obligation of Morgan Stanley, whose survival hung in the balance. Those who owned similar notes by Lehman are even worse off, with no trades completed this week and little or nothing to recover.