is slowly declining

clear distinction between products backed by single assets‘Single Share’, ‘Single Index’ - and products backed by a variety of underlying assets - ‘Share Basket’, ‘Index Basket’ -.

‘This suggests that it is rather the ‘structured’ nature of SRPs’ payoff (the most challenging part for investors to assess) that drives costs,’ stated the regulator.

The report also shows that the has been a change in total costs in 2021 from 2018-2020 with several product types getting more expensive. The median cost of products of Capped Call type increased for 12 out of 16 issuers, and for seven out of 11 issuers in the case of Uncapped Call products. The median cost of products of Reverse Convertible type increased for 16 out of 24 issuers.

‘Products issued in 2021 tended to be more expensive than analogous products issued in previous years,’ it said.

The regulator concluded that expenses are usually front-loaded in the form of entry costs - these are the only costs in over 92% of the KIDs where information on costs was retrieved, and that around four percent of the products are expected to incur recurring costs applied over their lifetime.

Financial entities’ website Source: Esma, StructuredRetailProducts.com, Financial entities’ website