Is it possible to alter the prescribed wording in the KID template for OTC derivatives? It is recognised in point 6a of Annex III and point 12 of Annex V of the Delegated Regulation that some of the s

Is it possible to alter the prescribed wording in the KID template for OTC derivatives? It is recognised in point 6a of Annex III and point 12 of Annex V of the Delegated Regulation that some of the specific prescribed texts should be adjusted when applied to certain types of Category 1 PRIIPs, such as swaps and similar OTC derivative products which do not require initial payments. In this specific case, the use of the following texts is considered appropriate (changes shown in strikethrough and bold). Presentation of the SRI (Annex III) 1. Text below the presentation of the SRI based on Annex III, point 3(b): Prescribed language [When considered illiquid]: You cannot/may not be able to cash in early. You will/may have to pay significant extra costs to cash in early Specific adjustments: You cannot/may not be able to cash in end your product early. You will/may have to pay significant extra costs to cash in end your product early Prescribed language [When considered to have a materially relevant liquidity risk] “You may not be able to sell (end) your product easily or you may have to sell (end) at a price that significantly impacts on how much you get back.” Specific adjustments: “You may not be able to sell end your product easily or you may have to sell end your product at a price that significantly impacts on the performance of your product on how much you get back.” 2. Narrative explanation - Element D Prescribed language: “In some circumstances you may be required to make further payments to pay for losses. (in bold) The total loss you may incur may significantly exceed the amount invested.” Specific adjustment: “In some circumstances you may be required to make further payments to pay for losses. (in bold) The total loss you may incur may be significant. 3. Narrative explanation - Element H Prescribed language: “This product does not include any protection from future market performance so you could lose some or all of your investment.” Specific adjustment: “This product does not include any protection from future market performance so you could lose some or all of your investment. incur significant losses.” 4. Narrative explanation – Element I: Prescribed language: “If (we) (are) not able to pay you what is owed, you could lose your entire investment” Specific adjustment: “If (we) (are) not able to pay you what is owed, you could lose your entire investment incur significant losses” Presentation of performance scenarios (Annex V) 1. Templates Prescribed language: “Investment” Specific adjustment: “Notional amount” 2. Templates – Table rows Prescribed language: “What you might get back after costs” “Average return each year” Specific adjustment for certain OTC derivatives where the amounts shown will represent the overall value of the product over time, which could result in amounts due to, or owed by, the retail investor: “What you might get back or pay after costs”. “Average return/loss over notional amount each year” 3. Narratives - Element F Prescribed language: “This product cannot be [easily] cashed in. This means it is difficult to estimate how much you would get back if you cash in before [the end of the recommended holding period/maturity]. You will either be unable to cash in early or you will have to pay high costs or make a large loss if you do so.” Specific adjustment: “This product cannot be [easily] cashed in ended. This means it is difficult to estimate how much you would get back if you cash in end before [the end of the recommended holding period/maturity]. You will either be unable to cash in end early or you will have to pay high costs or make a large loss if you do so.” Presentation of costs (Annex VII) 1. Description of the costs shown in the section “What are the costs?” Prescribed language: “The tables show the amounts that are taken from your investment to cover different types of costs. These amounts depend on how much you invest, how long you hold the product [and how well the product does (where applicable)]. The amounts shown here are illustrations based on an example investment amount and different possible investment periods. We have assumed: - [In the first year] you would get back the amount that you invested (0 % annual return). [For the other holding periods we have assumed the product performs as shown in the moderate scenario] - [EUR 10 000/1 000 per year] is invested” Specific adjustment: “The tables show the amounts that are taken from your investment have to be paid to cover different types of costs. These amounts depend on the notional value how much you invest, how long you hold the product [and how well the product does (where applicable)]. The amounts shown here are illustrations based on an example notional value investment amount and different possible investment periods. We have assumed: - [In the first year] you have no profit or loss would get back the amount that you invested (0 % annual return). [For the other holding periods we have assumed the product performs as shown in the moderate scenario] - A notional value of [EUR 10 000/1 000 per year] is invested” 2. Narrative after Table 2 “Composition of costs” Prescribed language: (Where applicable): “Different costs apply depending on the investment amount [explain circumstances or use an example in maximum 150 characters]” Specific adjustment: (Where applicable): “Different costs apply depending on the notional value investment amount [explain circumstances or use an example in maximum 150 characters]” (Answer provided by the ESAs on the application of the PRIIPs Delegated Regulation, revised on 21 December 2022) 6. For CFDs or other leveraged products should the €10,000 amount in the KID be the amount of deposit paid of the gross notional of the trade? For example, to buy €10,000 of a stock index only requires a payment of €500 under the ESMA leverage guidelines. Accordingly, should the RIY calculation be done off the deposit amount to clearly show the impact of leverage on overnight funding costs and other costs? Alternatively, a €10,000 payment would buy someone €200,000 of a stock index under ESMA’s 5% leverage rule for CFDs so should the RIY and performance calculations be done off that amount? Also, in the performance scenarios should it be the performance on the total notional of the product or on the total deposit?