PRIIPs Regulation

The Packaged Retail and Insurance-based Investment Products ("PRIIP") Regulation became applicable on 1 January 2018 (the "Regulation").

A PRIIP is defined as any investment where the amount repayable to the investor is subject to fluctuations because of exposure to reference values. For example, PRIIPs include ETFs, options, futures, Contract for Difference (CFDs), and structured products.

PRIIP manufacturers are required to prepare Key Information Documents ("KIDs") and persons advising or selling PRIIPs are required to provide these to retail investors based in the European Economic Area (EEA) and the United Kingdom (UK). Information in the KID aims to enable those investors to better understand and compare PRIIP products.

As a broker, we are required to block trading in a PRIIP if a KID is not available.

The objectives of the PRIIPs Regulation.

Since the financial crisis of 2008, one of the main objectives of the European and UK regulators has been to increase consumer protection and rebuild confidence in financial markets.

The Regulation specifies that KID must be prepared in a standardised format.

By defining a standard format and content for the KID, the Regulation aims to:

  • Ensure that the information provided is complete and comparable between similar products in order to help investors make an informed investment decisions.

  • Improve transparency and increase confidence in the retail investment market.

What is a KID?

The KID is a 3-page document that contains important details of the PRIIP product including general description, cost, risk reward profile and certain performance scenarios.

Who is the regulation applicable to?

The Regulation applies to both PRIIPs manufacturers and distributors. The responsibility to create and maintain the document falls to the PRIIP product manufacturer. However, any distributor or financial intermediary that sells or provides advice about PRIIPs to a retail investor, or receives a buy order for a PRIIP from a retail investor, must provide the investor with a KID. This also applies to execution-only, online environments.

Who should receive a KID?

Retail investors domiciled in the EEA and the UK should receive a KID prior to investing in a PRIIP. If no KID is available from the manufacturer, the PRIIP will be restricted from trading for EEA and UK retail clients.

Generally, KIDs must be provided in an official language of the country in which a client is resident.

However, our clients have agreed to receive communications in English, and therefore if a KID is available in English all EEA and UK clients can trade the PRIIP product regardless of their country of residence.

If a KID is not available in English, but one is available in another language, German for example, the PRIIP can only be traded by retail clients who are citizens of, or resident in countries where that language is an official language, in this example Germany, Austria, Belgium, Luxembourg or Liechtenstein.

Special Case – US ETFs

U.S. clients are not impacted by PRIIPs, so the issuers of U.S. listed ETFs usually do not create KIDs. This means that EEA and UK retail clients do not have access to such products. Clients nevertheless may choose to explore other options:

  1. Many US ETF issuers have equivalent ETFs issued by their European entities. European-issued ETFs usually have KIDs and are therefore freely tradable.

  2. Clients can trade most large US ETFs as CFDs. The CFDs are issued by our European entities and as such have a KID available.

  3. Clients may be eligible for re-classification as a professional client, for whom KIDs are not required.

Please note that the above options are general in nature and do not constitute advice or recommendation on a particular course of action.

CLIENT CATEGORISATION

We categorise all individual clients as “Retail” by default as this affords clients the broadest level of protection under the regulartory system. Client who are categorised as “Professional” do not receive the same level of protection as “Retail” but are not subject to the KIDs requirement. As defined in the European and UK rules, “Professional” clients include regulated entities, large clients and individuals who have asked to be re-categorised as “elective professional clients” and meet the regulatory requirements based on their knowledge, experience and financial capability.

We provide an online step-by-step process that allows “Retail” to request that their categorisation be changed to “Professional", subject to meeting regulatory criteria of such categorisation.

Implications for Interactive Brokers:

In order to meet the PRIIPs Regulation, where required, IB UK will provide KIDs electronically by means of a website (“PRIIPs KID Landing Page”).

Where can I find the PRIIPs KID Landing Page?

The KIDs can be accessed from our designated PRIIPs KID Landing Page. There are three different ways you can find the KIDs. They are available through our Trader Workstation (“TWS”) system, our website, Client Portal, and our mobile apps (such as IBKR Mobile, IBKR GlobalTrader and on IMPACT).

1. Find Through TWS

  • Log into TWS

  • Right click on the symbol of the PRIIP product for which you want the KID.

  • Under Financial Instrument Info select Details.

2. Find KIDs through the our website:

  • Open the Trading tab and select Exchange Listings.

  • From there, select the product type and the region of the product for which you would like to find the contract information.

  • Select the PRIIP product you would like to see the KID and, navigate to the Quote Details page (below).

  • From the Quote Details page, click the PRIIPs KID 'Log In to View' link, which will lead you to our PRIIPs KID Landing Page after logging in to Client Portal.

3. Find KIDs through Client Portal:

  • Log into Client Portal.

  • Type the PRIIP instrument name or symbol in the search bar to see the related KID

  • After selecting he Buy or Sell direction, the PRIIPS KID link is visible in the Order Ticket window.

  • Alternatively, you can also access the KID Landing Page by clicking on the Help(?) icon followed by Support Center.

  • In the Information & Tools section, select PRIIPs KID, which will take you to our PRIIPs KID Landing Page.

4. Find KIDs through Mobile applications (see example of IBKR Mobile):

  • Log into IBKR Mobile

  • Select the PRIIP product you wish to trade.

  • On the order entry screen, you can select the PRIIPs Key Information Document.

5. Access the PRIIPs KID Landing Page for KIDs prepared by us:

Can I potentially get exposure to a US ETF/other PRIIPs restricted product through a CFD?

Yes, as some CFDs are designed to track the performance of underlying assets, including ETFs and other PRIIPs products.

If an investor trades a CFD that is designed to track the performance of a U.S. ETF or other PRIIPs product, the investor may be indirectly investing in that underlying asset. This is because the CFD's value is based on the value of the underlying asset, and any gains or losses in the value of the underlying asset is usually reflected in the value of the CFD.