{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "synthetic",
    "complex_factors": "Use of total return swaps and contracts for difference, synthetic replication, securities lending, exposure to structured products",
    "classification": "complex",
    "supporting_data": "The HSBC Europe Sustainable Equity UCITS ETF invests up to 10% of its assets in total return swaps and contracts for difference, which are derivatives integral to its investment strategy rather than solely for efficient portfolio management. This synthetic replication method introduces counterparty and collateral risks that are difficult for retail investors to understand, aligning with MiFID II criteria for complexity. The Fund also engages in securities lending up to 30% of assets, adding counterparty risk, though this alone does not determine complexity. The underlying index is transparent, but the synthetic replication and derivative use dominate the complexity assessment. According to MiFID II Article 25(4)(a)(iv) and Article 57 of the Delegated Regulation, UCITS ETFs are presumed non-complex unless they embed derivatives as a core part of their strategy or have complex structures. The use of swaps and CFDs, as well as synthetic replication, places this ETF in the complex category. ESMA guidelines and CESR advice confirm that synthetic ETFs and those employing complex portfolio management techniques should be considered complex and subject to appropriateness assessments. Therefore, despite being a UCITS, the ETF's derivative use and synthetic replication classify it as complex under MiFID II rules."
}