{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "physical",
    "complex_factors": "Use of derivatives including total return swaps, exposure to structured products like CLOs, potential counterparty and collateral risk",
    "classification": "complex",
    "supporting_data": "The Global X Video Games & Esports UCITS ETF is a UCITS-compliant ETF that aims to track the Solactive Video Games & Esports v2 Index primarily through physical replication of the index's equity securities and depositary receipts. However, it also uses financial derivative instruments, specifically total return 'unfunded' OTC swaps and exchange-traded equity futures, for investment purposes and efficient portfolio management. The use of OTC swaps introduces counterparty risk and collateral risk, which are complex features under MiFID II. According to MiFID II Article 254 and Delegated Regulation EU 2017/565 Article 57, any ETF embedding derivatives integral to its investment strategy or using synthetic replication is generally classified as complex due to the difficulty for retail investors to understand these risks. Although the ETF is UCITS and uses physical replication as its main method, the presence of derivatives such as swaps and futures that are not solely for hedging but part of the investment approach, and the involvement of securities lending (which adds counterparty risk), contribute to complexity. ESMA guidelines and MiFID II criteria specify that ETFs using derivatives beyond efficient portfolio management or embedding structured products like CLOs are complex. The ETF's risk profile is high (risk category 6), reflecting market volatility and derivative-related risks. Therefore, despite being a UCITS ETF, the use of derivatives and structured exposures leads to a classification of complex under MiFID II. This means an appropriateness assessment is required for retail investors before purchase, ensuring they understand the risks involved."
}