Key Information Document (KID)
From 1 January 2023, the KIID for funds (UCITS and investment firms) has been replaced by the Key Information Document or KID for short. The KID will now provide you with even more comprehensive information about the funds, including their risks, expected returns and other vital details. On this page you can find more information about the KID and what implications this change has on you as an investor.
What does the KID entail?
The KID adheres to European regulations aimed at safeguarding retail investors and is mandated to be provided to them. The KID provides information on investing in so-called packaged retail and insurance-based investment products (PRIIPs), such as funds, structured products and derivatives. The KID provides insight into the operation of the investment product but also insight into the product’s risks, costs and returns. KIDs from different providers allow you to compare different investment products.
The obligation to provide a KID already applies to most investment products, such as structured products, derivatives and ETFs, since 1 January 2018. From 1 January 2023, this obligation will also apply to funds.
What is the PRIIPs Regulation?
PRIIPs, which stands for Packaged Retail and Insurance-based Investment Products, refers to a regulatory framework implemented in the European Union (EU) to provide standardized information to retail investors about investment products. PRIIPs packages are investment products that fall under this framework.
They primarily include:
- Structured financial products, such as warrants that are part of insurance policies, securities, or banking products.
- Closed-end and open-end investment funds.
- Financial products whose value is derived from reference values, such as stocks or currency rates (derivative instruments).
- Investment-type insurance products, such as life insurance with an investment or savings component, as well as hybrid products.
- Instruments issued by special purpose entities.
This regulation does not exclusively apply to ETFs, but in the following part of this page, we will focus specifically on this type of product.
Why was this regulation created?
The primary goal of this regulation was to strengthen the protection and rebuild the confidence of retail investors in the financial market by promoting greater transparency. These regulations were designed to be implemented across all EU member states starting from 31st December 2016, with the obligations coming into effect from 1st January 2018. It is important to note that the regulation specifically focuses on retail investors.
One of the key elements of the regulation is the calculation and presentation of comprehensive data included in the Key Information Document. This document is designed to provide retail investors in the EU with a better understanding of the key features and risks of the aforementioned investment products. Additionally, the PRIIPs Key Information Document regulations aim to make these products more comparable across Europe
Who has to comply with the regulation?
The issuers of these ETFs must provide retail clients with necessary documents in accordance with MiFID classification. Without their delivery, their products will not be available for trading to retail clients.
It seems that non-European issuers do not want to qualify as “providers” for European consumers. This would mean that they would also have to fulfil all related legal obligations. It is these other legal obligations that prevent non-European providers from providing KIDs (Key Information Documents), as there are no indications that the required translation is a barrier for issuers to enter the European market.
Practical implications
This means that as a retail client, you cannot directly trade American, Canadian, Mexican, Hong Kong, and Australian ETFs through LYNX. These products are available for trading only for professional clients according to the MIFIR directive.
Even if you have a corporate account, you are most likely classified as a retail client. The classification as a professional investor depends on the volume of your transactions, the size of your account, and your experience in the financial sector.
FAQ
You can conveniently access the KID documents directly within the LYNX+ online platform. As an investor, you do not have to take any actions yourself.
- LYNX+
Login in to the LYNX+ platform with your user data. After entering your username and password, you will need to use your two-factor authentication. After selecting the trading instrument, you will find a link to the Key Information Document (KID) on the right-hand side.
- TWS
Login in to the TWS platform with your user data. After entering on the TWS platform, you can access the related KID document by right-clicking on the product ticker, which will open a menu. Click on Financial Instrument Info and then select Details.
- Client Portal
Log in to the Client Portal with your user data. After entering your username and password, you will need to use your two-factor authentication. After login in, you will find where you can use the search function to find related KID documents. Click on Help at the top right, and then select Support Center. Once the Support Center opens, you can choose PRIIPS Kid.
Trading American, Canadian, Mexican, Hong Kong, and Australian ETFs through LYNX is only possible for professional investors. Individual investors can still hold and/or sell their positions in these ETFs. The PRIIPs (Packaged Retail Investment and Insurance-based Products Regulation) regulations require issuers of these products to publish a document called the Key Information Document (KID) for each product offered in the official language of your country. Most of these issuers do not publish these documents. As a result, retail clients cannot directly purchase these products.
- LYNX+
Login in to the LYNX+ platform with your user data. After entering your username and password, you will need to use your two-factor authentication. After selecting the trading instrument and click Send Order you will find information if order is rejected before submission.
- TWS
Login in to the TWS platform. with your user data. After login on the TWS platform, For a product that has restrictions, the symbol ‘NT‘ is displayed. When you hover your mouse cursor over the name, you will see information indicating that the particular product is not available for trading.
- LYNX Trading App
In the mobile application, for a product that has restrictions, there is a message at the bottom of the screen. By clicking on the Trade Notice, you will see information indicating that the particular product is not available for trading.