Swap ETF
An ETF that tracks its index synthetically, through an exchange agreement (swap) with a bank.
In short
As of 8 October 2026A swap ETF tracks its index synthetically. Instead of buying the index stocks, it holds a different basket of securities and exchanges that basket's return for the index return under a contract with a bank. EU rules cap the bank's default risk at 10 % of fund assets per counterparty. The fund assets remain segregated assets.
A swap ETF does not buy the stocks in its index. It holds a different basket of securities and agrees a swap with a bank: the fund hands over the return of its basket and receives the index return in exchange. This is synthetic replication.
The risk: if the bank fails, part of the return is missing. EU rules for retail funds cap this counterparty risk at 10 % of fund assets per counterparty, and it is usually much lower. The fund assets themselves remain segregated assets. Some show a good tracking difference.
Example: a swap ETF on the S&P 500 holds European stocks and receives the return of the 500 US stocks through a swap. Normally you notice none of this in the price. The basics are in the chapter ETF or single stock.
Sources
As of 8 October 2026 · Educational content, not investment or tax advice.