{
    "ucits": true,
    "type": "ETF",
    "leverage": true,
    "derivatives": true,
    "swaps": false,
    "inverse": false,
    "replication_method": "synthetic",
    "complex_factors": "Leverage, Derivatives, Synthetic replication, Complex underlying index (Emerging Markets futures), Daily reset compounding effect",
    "classification": "complex",
    "supporting_data": "The WisdomTree Emerging Markets 3x Daily Leveraged product is a UCITS-eligible Exchange Traded Product (ETP) that provides leveraged exposure (3x) to an Emerging Equities Rolling Futures Index via futures contracts. It uses derivatives (futures) as an integral part of its investment strategy to achieve leveraged exposure, which is reset daily, causing a compounding effect that makes the product's return over periods longer than one day deviate from a simple multiple of the index return. This daily leverage reset and use of futures introduce complexity, including risks such as leverage risk, market volatility, and the need to understand futures rolling and contango/backwardation effects. The product is explicitly described as leveraged and derivative-based, with a high risk rating (7/7), and it carries risks that are difficult for retail investors with basic knowledge to understand. According to MiFID II rules and ESMA guidance, UCITS ETFs that use synthetic replication or derivatives as a core part of their strategy, especially with leverage, are classified as complex. The product's structure, use of derivatives for achieving leverage, and the complexity of the underlying futures index all contribute to this classification. Therefore, despite being UCITS eligible, this ETF is complex under MiFID II. This aligns with regulatory views that leveraged ETFs and those using synthetic replication or embedded derivatives are complex and require appropriateness assessments for retail investors. The product also carries a mandatory comprehension alert indicating it is not simple and may be difficult to understand, reinforcing its complex classification."
}