ETF KID solution for WL partners under PRIIPs

Background and Clients in scope

In order to comply with the PRIIPs & UCITS regulation regarding Key Information Documentation (KID) & Key Investor Information Documentation (KIID), retail clients (based on their Mifid II classification) residing within the EU need to be presented with the possibility of viewing a KID/KIID either before or immediately after trading. Saxo ensures it has provided a KID/KIID prior to trading through the implementation of a KID-availability check; if the check fails, the client is restricted from placing an order and will receive a general notification “xxx due to instrument configuration” (NB: this notification can also be triggered due to other rules than the KID-check, e.g. if it is a general reduce-only instrument, such as US OTC stocks). 

It is the manufacturer/issuer of the instrument, who is responsible for providing the KID/KIID, but is not obliged to do so. Saxo as a distributor has chosen not to do any translations of the KIDs available from manufacturers, meaning we only distribute KIDs that ETF issuers produce themselves. We will not be able to add KIDs or request from an issuer to produce additional KIDs. The client/WL partner themselves need to contact the ETF issuer to enquire about such possibilities.

KID-availability criteria

Certain criteria go into the KID-availability check, which must be satisfied for the client being able to place an order in the instrument.

General language criteria & specific product criteria for KID-availability check

The language criteria is general and applicable to all the products where a KID-availability check has been enabled. The appropriate language is as a general rule of thumb based on the client’s country of residence + English per default. KIDs can be issued in many different languages.

In addition to the language check, there is an additional check which ‘Market’ the instrument is intended for. KIDs are issued either for a specific “Market” or for a generic “undefined” market (which means it´s intended for clients of all countries) 

ETP Market criteria example

The availability of the instruments is according to the market (jurisdiction), which is matched to the residency country of the client and the respective allowed languages of the residency country. All available KIDs according to the rules will be shown to the client. If the client has chosen a platform language in another language than the official languages of the residency country, a KID in this language will also be shown, if it exists, but only if any of the official language KIDs are available and the market criteria is satisfied.

Example 1: ETF = IE00BYZK4776

A retail client resident in Denmark, will in this example, be able to trade the instrument as the KID exists in Danish with a DK market. A retail client resident in Belgium, will in this example, not be able to trade the instrument. The language criteria is satisfied, but no market equals BE or Undefined.

Example 2: ETF = LU1409136006

A retail client resident in Belgium, will in this example, be able to trade the instrument as the KID exists in English and with an Undefined Market A retail client resident in Italy, will in this example, be able to trade the instrument as the KID exists in Italian and with an Italian Market.

Important to note:

• The above described logic is the standard setup that will be enabled by default. White Labels have the possibility to customize this logic. I.e. it can be requested to be configured to ignore the market notion (i.e. ONLY language criteria should be applied). This means as long as English or a country specific language KID exists – regardless of its market notion – the end clients will be able to trade the ETF.
• Clients classified as Professional (e.g. via Saxotools) will be able to trade all ETFs and no restrictions will be applied
• Clients residing outside the affected EU countries will be able to trade all ETFs and no restrictions will be applied. As basis of country of residence check the system is reviewing the country entered as “Tax Country” on Counterpart level (in Saxotools (CCM))
• Warning: US ETFs have NOT issued any KIDs – like Saxo’s own clients, WLs that have this solution enabled, will NOT be able to offer US ETFs to their retail clients anymore (all US ETF trade attempts will be rejected due to missing KIDs)
• It can NOT be enabled for specific clients or on subhouse level – either the full structure and all clients are implemented, or none.