{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "synthetic",
    "complex_factors": "Synthetic replication, use of total return swaps, counterparty risk, collateral risk, exposure to derivatives, securities lending",
    "classification": "complex",
    "supporting_data": "The HSBC MSCI Emerging Markets UCITS ETF invests up to 10% of its assets in total return swaps and derivatives, including contracts for difference, which are integral to its investment strategy to replicate the MSCI Emerging Markets Index. This synthetic replication method involves counterparty and collateral risks that are difficult for retail investors with basic knowledge to understand. The fund also engages in securities lending up to 30% of its assets, which introduces additional counterparty risk. The replication method is synthetic, relying on derivatives rather than physical holding of underlying securities. According to MiFID II Article 254 and Delegated Regulation EU 2017/565 Article 57, such use of derivatives integral to the investment objective, synthetic replication, and embedded counterparty risks classify the ETF as complex. The fund's structure and risks are not straightforward for retail investors, requiring an appropriateness assessment under MiFID II. Although it is UCITS compliant, the presence of embedded derivatives and synthetic replication overrides the general presumption of non-complexity for UCITS ETFs. The fund does not use significant leverage beyond UCITS limits, but the derivative use and synthetic replication are decisive factors. Therefore, under MiFID II rules and ESMA guidelines, this ETF is classified as complex."
}