MiFID II – Costs and Charges Reporting

MiFID II places higher standards on how banks and investment firms like HSBC conduct business with their clients. As a customer of HSBC, this means we assess and give you additional information on the costs and charges you may expect that relate to the services HSBC Global Private Banking provides, as well as the costs associated with the investments and products you buy and sell.

• Before you place a market order with us, or before you sign-up to one of our managed services, we will provide you with additional documentation which explains the costs and charges that you can expect to pay (“Pre-trade Costs and Charges Report”). This report gives a deeper understanding of the costs, so that you can make an informed decision on whether to proceed.
• You’ll receive an annual statement (“Annual Costs and Charges Report”) which will summarise the total costs and charges that you paid for the services received and transactions undertaken during the preceding 12 month period.

To enable us to be more transparent regarding the costs and charges on your investments and investment services, we have a regulatory obligation to disclose the aggregated information and therefore it is not possible to opt-out from receiving this.

The costs and charges reports cover a wide range of products offered by HSBC Global Private Banking with the exception of Precious Metals, Insurance Products and Cash Deposit products.

On a pre-trade basis you can expect:

• A generic set of illustrative disclosures covering Foreign Exchange (FX), Fixed Income and Equities transactions, as well as our managed services.
• Specific disclosures are provided for Funds, Exchange Traded Funds (ETFs), Alternatives and Structured Products on a transactional basis.
• For HSBC Private Bank Luxembourg only: starting 1st of October 2023, the Bank will send you ex ante disclosures before each trade for all investment products subject to the Regulation. You will no longer receive the generic set of illustrative disclosures for Foreign Exchange (FX), Fixed Income and Equities transactions.
  
  

On an annual basis you can expect

• A disclosure of all costs and charges incurred for your portfolio throughout the reporting period – the “Annual Costs and Charges Report”.
• A more detailed report which shows the costs on an itemized basis is available at your request.

• The pre-trade Costs and Charges report provides an estimate of the potential costs of your investment, whereas the annual ex-post report discloses the actual costs that were incurred within your portfolio.
• The figures based on HSBC’s own data (Service costs) are accurate but Product costs are dependent on the quality of information made available to us by the manufacturers or data suppliers. In some cases, data may not be available at the time the annual Costs and Charges report is generated and this may impact the overall cost and performance calculations.

Product costs are not paid directly by yourself, they have always been charged by manufacturers and effectively reduce the returns achieved. We are now disclosing these costs as a separate category in both the pre-trade and annual Costs and Charges reports to improve clarity and help customers understand what they are paying for.

• The transaction cost figure includes an element of implicit cost (“slippage”), which is the difference between the mid-market price at the time the trade is sent to the market (“arrival price”) and exact execution price of the trade. It is possible for the slippage cost to be negative - for example when buying an asset the arrival price might be higher than the actual price paid.
• The offset resulting from anti-dilution techniques could in theory be higher than the fund transaction costs, where for example there are large investor inflows or outflows relative to the size of the fund and the underlying portfolio turnover, resulting in zero or negative transaction costs.

The annual Costs and Charges report shows disclosure at a portfolio level while the pre-trade documents present cost estimates at an asset level, so it may be difficult to compare the costs directly between the two reports.