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PRIPPS and KID compliant ETFs for European investors

U.S. based ETFs are still unavailable for E.U. based investors due to the PRIPPS/ KID regulation discussed in the previous note. In this article we will list some alternative European based ETFs that could be used to follow a few of the Logical Investment strategies. So far the alternative ways to trade LI strategies as a EU citizen are: A. Try to qualify for professional status with your broker under MiFID II rules. Guidelines may differ amongst brokers. The Client declares to fulfil 2 out of the 3 conditions set forth below. - Carrying out transactions, in significant size, at an average frequency of 10 transactions per quarter over the previous four quarters; -T he size of the portfolio exceeds EUR 500,000, whereas portfolio is defined as including cash deposits and financial instruments; - To work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions to be entered into. B. Use CFDs to trade the equivalent ETFs. Downside is cost of borrowing which may eat into long term profits. Upside is you can leverage your position. C. Use E.U. based equivalent ETFs. Here is a list of some useful ETFs trading at the London exchange. Original US ETF E.U. based Equivalent Exchange Currency Full Name SPY CSSPX LSEETF USD ISHARES CORE S&P 500 TLT IDTL LSEETF USD ISHARES USD TRES 20PLUS YR PCY IEMB LSEETF USD ISHARES JPM USD EM BND USD D JNK IHYU LSEETF USD ISHARES USD HY CORP USD DIST TIP IDTP LSEETF USD ISHARES USD TIPS AGG IUAG LSEETF USD ISHARES US AGG BND USD DIST GLD IGLN LSE USD ISHARES PHYSICAL GOLD ETC D. Use options or Futures This is possible for our UIS and GLD-USD strategies. Using Futures may not [...]

2018-07-07T10:35:33+00:00By |2 Comments

U.S. ETFs unavailable to European investors: PRIPPS and KID

If you are a European investor and using Interactive Brokers (U.K.) as your broker you were in for a surprise this past week: Most major U.S. ETFs like SPY, TLT, GLD are unavailable for trading to retail traders. From justETF:  "The culprit is PRIIPs – a set of EU investment regulations designed to protect consumers (PRIIPs stands for Packaged Retail Investment and Insurance Products). PRIIPs require fund providers (including ETFs) to produce a Key Information Document (KID) that enables investors to compare the risks, rewards and costs of different investment products. European-domiciled UCITS ETFs were ready with their new KIDs when PRIIPs came into force alongside the MiFID II rules at the beginning of 2018. However US-domiciled ETFs did not comply and, as they mostly serve the US market, producing EU-approved information at their own cost is not a priority." We hope that this is a temporary problem and that a solution will be found. Until then we are looking at CFD's as an alternative for Europeans traders using LI strategies. Contracts Of Difference are available at IB U.K. for most major U.S. ETFs. The spreads and commissions are at par with the ETFs themselves ($0.01 spread, $0.05 commission) so they seem like a viable choice although there is a financing charge (current USD rate +1.5%) for holding positions overnight. Here is a snapshot of some major ETFs and their respective CFDs: You can read more about CFD's here: https://www.interactivebrokers.com/en/index.php?f=1170 If you have any comments or feedback please post them at the forums: https://logical-invest.com/forums/topic/european-markets/

2018-06-22T12:11:58+00:00By |21 Comments