Delivering the packaged retail and insurance-based investment products (Priips) Key information document (Kid) in a timely manner is proving to be a mountainous task for most market participants, some of whom have been working at maximum speed for months to meet the January 1 deadline. SRP had a look in the Netherlands to see how the new requirements have fared among the various providers in the structured products market.

"We have indeed been very busy in recent weeks to get everything ready in time for Mifid II and Priips," said Marcel Pronk (pictured), securities, structured investments distribution, at Kempen. It has proven quite a challenge to have a Kid ready on time for all products and that's why Kempen decided to prioritise, according to Pronk. "We have made sure that we had a Kid ready for the products for which we see the most demand so that they can be sold again on the secondary market," he said.

"It was certainly a lot of work," said a source at a foreign investment bank which is also active in the Netherlands. "For the majority of our products there is now a Kid available. We offer thousands of products in the whole of Europe, so that was quite an extensive operation to get the right documentation and numbers for those products."

According to Pronk, Kempen now has a Kid available for the majority of the listed products which are issued by Van Lanschot. "However, for a number of products with a specific underlying - such as risk-control products - we have had to make some extensions in our systems in order to be able to carry out the calculations in the Kid correctly. As soon as these adjustments to our systems are made these Van Lanschot products will be available for purchase again," Pronk said.

ABN Amro has a Kid for all products which come under the Priips regulation, according to a spokesperson for the bank. "We have not stopped with certain products."

ABN Amro, which offers over the counter (OTC) derivatives such as dual currency deposits, interest rate swaps and commodity options, had expressed its concern about the practical consequences of the Priips rules in December in a letter to the Dutch Authority of Financial Markets (AFM). According to the letter, despite the additional guidance that has appeared in recent years, the concern about the effect of the Priips rules for hedging products has remained. 'The problem is, in particular, that certain derivatives have no 'investment' objective but a 'hedging' purpose,' according to ABN Amro. The text about 'how long to keep the product' and 'cashing in at an early stage' and terms such as 'invested capital' and 'yield' does not fit in well with hedge products since their primary goal is not to achieve a return but to reduce the risk, according to the bank.

Rabobank announced that for Rabo Wereld Note april 2018, a seven-year medium-term note linked to a weighted basket of three indices and two exchange-traded funds, it has decided not to draw up a Kid. As a result, the product, which matures on April 20, can no longer be purchased by retail investors.

"The entire Kid process has also been a challenge for the third party issuers we work with on a regular basis," said Pronk. Kempen received the Kids from BNP Paribas on January 9, so products issued via the French bank can be bought again, according to Pronk. "We are still working with UBS for their products but that will also be solved in the coming weeks."

Whereas most banks seem to be up and running and have Kids for the majority of their products some Dutch brokers, including Degiro, have temporarily stopped the trading in certificates and derivatives for which the Kid is not yet available in the local language.

"There are indeed a number of brokers who temporarily have suspended the trading of certain products from other markets," said a source. "Products from Euronext Paris for example are currently not available from certain brokers which are focused on the Dutch market [because the Kid is not yet available in the Dutch language]. However, there is not much clarity about that at the moment and many brokers are still evaluating the matter," said the source.

The suspension of trading is not yet happening at Binck, according to a spokesperson for the online broker. "It is not the case that products for which the Kid information is currently missing have been removed from our product range.

"Priips came into effect last week. Last year we already approached our data suppliers to be able to respond to this legislation in time. We also took into account that there could be providers who would not be able to meet the deadline, also because the deadline for both the distributors and manufacturers was the same," said the spokesperson.

Right now Binck is taking stock of the products and suppliers that do not meet the new legislation. "When our customers are placing orders they will see a warning if the Kid is not available. In the meantime, we will do all we can to get the Kid for these products to keep them available to our customers," the spokesperson said. "However, ultimately, at Binck we could end up with a situation that if these issuers do not have the Kid available, or do not have a Kid available in Dutch, that we can no longer keep those products in our assortment for buy. Customers with the concerned products in their portfolio of course can keep their positions or sell when desired," the official said.

The bank expects the issue to be solved for all listings in Europe but "perhaps it will be more difficult for a number of non-EU listings", according to the spokesperson.

Related stories:
No Priips, no sales: new rules threatening to cause serious 'compliance problems', promise million percent returns

Kid language barrier forces Dutch broker to halt certificates trading