Ground Rules. FTSE TMX Canada Floating Rate Note (FRN) Index v2.0

Transcription

1 Ground Rules FTSE TMX Canada Floatng Rate Note (FRN) Index v2.0 ftserussell.com January 2018

2 Contents Introducton... 3 Management Responsbltes... 5 FTSE Russell Index Polces... 7 Elgblty Crtera... 8 Prce Sources... 9 Perodc Change to the Portfolos Appendx A: Index Calculatons Appendx B: Further Informaton FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

3 Secton 1 Introducton 1.0 Introducton 1.1 The FTSE TMX Canada Floatng Rate Note (FRN) Index The FTSE TMX Canada Floatng Rate Note (FRN) Index s desgned to reflect the performance of domestc Canadan Government and Corporate Floatng Rate Note (FRN) securtes denomnated n CAD. 1.2 IOSCO FTSE Internatonal Lmted (FTSE) consders that the FTSE TMX Canada Floatng Rate Note (FRN) Index meets the IOSCO Prncples for Fnancal Benchmarks as publshed n July FTSE TMX hereby notfes users of the ndex that t s possble that crcumstances, ncludng external events beyond the control of FTSE TMX, may necesstate changes to, or the cessaton of, the ndex and therefore, any fnancal contracts or other fnancal nstruments that reference the ndex or nvestment funds whch use the ndex to measure ther performance should be able to wthstand, or otherwse address the possblty of changes to, or cessaton of, the ndex. 1.4 Index users who choose to follow ths ndex or to buy products that clam to follow ths ndex should assess the merts of the ndex s rules-based methodology and take ndependent nvestment advce before nvestng ther own or clent funds. No lablty whether as a result of neglgence or otherwse s accepted by FTSE TMX nor ts subsdary undertakngs (or any person concerned wth the preparaton or publcaton of these Ground Rules) for any losses, damages, clams and expenses suffered by any person as a result of: any relance on these Ground Rules, and/or any errors or naccuraces n these Ground Rules, and/or any non-applcaton or msapplcaton of the polces or procedures descrbed n these Ground Rules, and/or any errors or naccuraces n the complaton of the Index or any consttuent data n the FTSE TMX Canada Index Famly 1.5 These Ground Rules Ths document sets out the Ground Rules for the constructon and management of the FTSE TMX Canada Floatng Rate Note (FRN) Index Seres. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

4 1.6 FTSE Russell FTSE Russell s a tradng name of FTSE Internatonal Lmted, Frank Russell Company, and FTSE TMX Global Debt Captal Markets Lmted and ts subsdares (ncludng MTSNext Lmted). FTSE Internatonal Lmted s the admnstrator of all FTSE Russell ndexes. 1.7 Credt Ratng Categores The FTSE TMX Canada Floatng Rate Note (FRN) Index s not classfed nto the broad credt ratng categores of AAA/AA, A, and BBB. 1.8 Captal Index (also known as the Prce Index or the Clean Prce Index) The captal ndex tracks the notonal weghted average change n the prces of the ndex consttuents and s calculated every busness day. 1.9 Total Return Index (also known as the Performance Index) A total return ndex s calculated for all the ndexes. A total return ndex takes nto account the prce changes and nterest accrual and payments of each ndex consttuent In addton to the Captal Index and Total Return Index, the followng ndex analytcs are also calculated: Average Coupon Average Yeld to Maturty Average Tme to Maturty Value of 01 Average Macaulay Duraton Average Modfed Duraton Average Convexty The sum of the nomnal value of all bonds n each ndex The number of bonds n each Index, and The weght of the ndex n relaton to ts relevant aggregated ndex (when applcable) 1.10 The base currency of the benchmark s CAD. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

5 Secton 2 Management Responsbltes 2.0 Management Responsbltes 2.1 FTSE Internatonal Lmted (FTSE) FTSE s the benchmark admnstrator of the ndex FTSE s responsble for the daly calculaton, producton and operaton of the FTSE TMX Canada Unverse Bond Index Seres and wll: mantan records of all the consttuents; be responsble for the addton and deleton of bonds and changes of nomnal amounts, n accordance wth the Ground Rules These Ground Rules set out the methodology and provde nformaton about the publcaton of the FTSE TMX Canada Floatng Rate Note (FRN) Index. 2.2 FTSE Canada Fxed Income Advsory Commttee The FTSE Canada Fxed Income Advsory Commttee s establshed by FTSE Russell The purpose of the Commttee s to provde a forum for FTSE Russell to nteract wth ndex users and other stakeholders wth a vew to enhancng the underlyng methodologes of FTSE Russell ndexes The Terms of Reference of the FTSE Canada Fxed Income Advsory Commttee are set out on the FTSE Russell webste and can be accessed usng the followng lnk: FTSE_Canada_Fxed_Income_Advsory_Commttee.pdf 2.3 Amendments to these Ground Rules These Ground Rules shall be subject to regular revew (at least once a year) by FTSE Russell to ensure that they contnue to meet the current and future requrements of nvestors and other ndex users. Any proposals for sgnfcant amendments to these Ground Rules wll be subject to consultaton wth FTSE Russell advsory commttees and other stakeholders f approprate. The feedback from these consultatons wll be consdered by the FTSE Russell Product Governance Board before approval s granted. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

6 2.3.2 As provded for n the Statement of Prncples for FTSE Fxed Income Indexes, where FTSE Russell determnes that the Ground Rules are slent or do not specfcally and unambguously apply to the subject matter of any decson, any decson shall be based as far as practcal on the Statement of Prncples. After makng any such determnaton, FTSE Russell shall advse the market of ts decson at the earlest opportunty. Any such treatment wll not be consdered as an excepton or change to the Ground Rules, or to set a precedent for future acton, but FTSE Russell wll consder whether the Rules should subsequently be updated to provde greater clarty. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

7 Secton 3 FTSE Russell Index Polces 3.0 FTSE Russell Index Polces These Ground Rules should be read n conjuncton wth the followng polcy documents whch can be accessed usng the lnks below: 3.1 Statement of Prncples for FTSE Fxed Income Indexes (the Statement of Prncples) Indexes need to keep abreast of changng markets and the Ground Rules cannot antcpate every eventualty. Where the Ground Rules do not fully cover a specfc event or development, FTSE Russell wll determne the approprate treatment by reference to the Statement of Prncples for FTSE Fxed Income Indexes whch summarses the ethos underlyng FTSE Russell s approach to ndex constructon. The Statement of Prncples s revewed annually and any changes proposed by FTSE Russell are presented to the FTSE Russell Polcy Advsory Board for dscusson before approval by the FTSE Russell Product Governance Board. The Statement of Prncples for Fxed Income Indexes can be accessed usng the followng lnk: Statement_of_Prncples_Fxed_Income_Indexes.pdf 3.2 Prce Sources For further nformaton, please see the FTSE TMX Canada Mult Dealer Prcng Methodology Gude whch can be accessed usng the followng lnk: FTSE_TMX_Canada_Mult_Dealer_Prcng_Methodology_Gude.pdf 3.3 Recalculaton Polcy and Gudelnes The Recalculaton Polcy and Gudelnes for Fxed Income Indexes document s avalable from the FTSE Russell webste usng the lnk below or by contactng nfo@ftserussell.com. Fxed_Income_Recalculaton_Polcy_and_Gudelnes.pdf 3.4 FTSE Russell Polcy for Benchmark Methodology Changes Detals of FTSE Russell s polcy for makng benchmark methodology changes can be accessed usng the followng lnk: FTSE_Russell_Polcy_for_Benchmark_Methodology_Changes.pdf FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

8 Secton 4 Elgblty Crtera 4.0 Elgblty Crtera 4.1 Elgble Securtes Floatng Rate Notes ssued n the domestc Canadan market n CAD as Floatng Rate Notes are elgble for the ndex. Securtes orgnally ssued as fxed-to-float are not elgble. Securtes must have a mnmum ndex ratng of A and a mnmum remanng term to maturty of 3 months. 4.2 Mnmum Nomnal Issuance Sze Securtes must meet mnmum sze requrements to help ensure that the securtes n the ndex are suffcently lqud, and that t s possble for a fund manager to replcate the performance of the Index. Mnmum ssue sze for ncluson n the FTSE TMX Canada Floatng Rate Note (FRN) Index s $300 mllon. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

9 Secton 5 Prce Sources 5.0 Prce Sources 5.1 The securtes that make up the FTSE TMX Canada Floatng Rate Note (FRN) Index are prced usng nputs from leadng fxed ncome broker / dealers n Canada at 4:00pm Eastern Tme. Normal settlement rules apply (e.g. 2 day settlement for Canada bonds under three years to maturty, 3 day settlement for most other bonds) and the derved sngle quote per ssue, or data, (Mult Dealer quote) s devsed usng propretary flters that frst remove any severe outlers, followed by a Standard Devaton Mean calculaton. Ths Mult Dealer data best represents the marketplace by removng the ablty of any one dealer to have undue nfluence upon the fnal calculated prce / yeld. The ndex s constructed usng md-market prces. Valuaton at the 4:00pm close s based on the trader's judgment of where a securty should be prced, takng nto account such factors as where the securty prevously traded, lqudty, and any marketwde as well as securty-specfc developments that can be expected to affect the prce. Ths polcy s ntended to reflect changng market condtons, even n cases where a securty may not frequently trade. For securtes that trade actvely, the closng prce wll generally be close to where the securty last traded, f not the same. For securtes that trade less frequently, however, there could be a larger dfference between the closng prce and the prce where the securty last traded. Consder the extreme case of a securty that trades n the mornng, s subsequently and unexpectedly downgraded, and does not trade for the rest of the day. When settng the 4:00pm prce, t s more accurate and conservatve for the trader to reflect the expected mpact of the credt ratng downgrade, rather than smply rely on the latest avalable transacton. For further nformaton, please see the FTSE TMX Canada Mult Dealer Prcng Methodology Gude whch can be accessed usng the followng lnk: FTSE_TMX_Canada_Mult_Dealer_Prcng_Methodology_Gude.pdf FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

10 Secton 6 Perodc Change to the Portfolos 6.0 Perodc Change to the Portfolos 6.1 Rebalancng the Indexes The FTSE TMX Canada Floatng Rate Note (FRN) Index s rebalanced on a daly bass. 6.2 Addton of Consttuents A new ssue enters the ndex on the day t s ssued or auctoned. The securty s ncluded n the calculaton of ndex rsk statstcs such as duraton on the day of ssue, although t does not affect the return on the ndex untl the followng busness day. The new securty does not begn to accrue nterest untl the new ssue settlement date. The cut-off tme for ncluson on the day of ssue s 3:00pm EST. 6.3 Removal of Consttuents A securty s removed from the ndex on the day ts remanng effectve term to maturty declnes to less than 3 months When a bond s downgraded below A, t s removed from the ndex 90 days after the downgrade. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

11 Appendx A: Index Calculatons The followng notaton s used n the followng calculatons: P,t A,t N,t Coupon y,t MacDur,t ModDur,t Dval01,t Convexty,t C,t clean prce of a consttuent bond on valuaton day t accrued nterest of a consttuent bond as of valuaton day t nomnal value of a consttuent bond on valuaton day t coupon rate of a consttuent bond yeld to maturty of a consttuent bond as of valuaton day t Macaulay duraton of a consttuent bond as of valuaton day t Modfed duraton of a consttuent bond as of valuaton day t Dollar duraton of a consttuent bond as of valuaton day t Convexty of a consttuent bond as of valuaton day t value of any coupon payment receved from the bond for the assumed settlement date at tme t. If none the value = 0 Clean Prce Index (Captal Index) The clean prce (PI) or captal ndex s gven by PI,0 =100 PI,t =PI,t-1 P,t N,t-1 P,t-1 N,t-1 Total Return Index The total return ndex (TRI) s gven by TRI,0 =100 TRI,t =TRI,t-1 (P,t +A,t+C,t ) N,t-1 (P,t-1 +A,t-1 ) N,t-1 FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

12 Average Coupon The ndex level average coupon (C) s gven by Average Yeld to Maturty C t = (P,t +A,t) N,t Coupon (P,t +A,t ) The ndex level average yeld to maturty (Y) s gven by Average Macaulay Duraton N,t Y t = (P,t +A,t) N,t y,t (P,t +A,t ) The ndex level average Macaulay duraton (D) s gven by Average Modfed Duraton N,t D t = (P,t +A,t) N,t MacDur,t (P,t +A,t ) The ndex level average Modfed duraton (MD) s gven by Average Value of 01 N,t MD t = (P,t +A,t) N,t ModDur,t (P,t +A,t ) The ndex level average value of Dval01 (DV01) s gven by Average Convexty The ndex level average convexty (Convx) s gven by N,t DV01 t = (P,t +A,t) N,t Dval01,t (P,t +A,t ) N,t Convx t = (P,t +A,t) N,t Convexty,t (P,t +A,t ) N,t FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13

13 Appendx B: Further Informaton A Glossary of Terms used n FTSE Russell s Ground Rule documents can be found usng the followng lnk: Fxed_Income_Glossary_of_Terms.pdf For further nformaton on the FTSE TMX Canada Floatng Rate Note (FRN) Index Ground Rules please vst or e-mal nfo@ftserussell.com. Contact detals can also be found on ths webste London Stock Exchange Group plc and ts applcable group undertakngs (the LSE Group ). The LSE Group ncludes (1) FTSE Internatonal Lmted ( FTSE ), (2) Frank Russell Company ( Russell ), (3) FTSE TMX Global Debt Captal Markets Inc. and FTSE TMX Global Debt Captal Markets Lmted (together, FTSE TMX ) and (4) MTSNext Lmted ( MTSNext ). All rghts reserved. The FTSE TMX Canada Floatng Rate Note (FRN) Index s calculated by FTSE TMX or ts afflate, agent or partner. FTSE Russell s a tradng name of FTSE, Russell, FTSE TMX and MTS Next Lmted. FTSE, Russell, FTSE Russell MTS, FTSE TMX, FTSE4Good and ICB and all other trademarks and servce marks used heren (whether regstered or unregstered) are trade marks and/or servce marks owned or lcensed by the applcable member of the LSE Group or ther respectve lcensors and are owned, or used under lcence, by FTSE, Russell, MTSNext, or FTSE TMX. All nformaton s provded for nformaton purposes only. Every effort s made to ensure that all nformaton gven n ths publcaton s accurate, but no responsblty or lablty can be accepted by any member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors for any errors or for any loss from use of ths publcaton or any of the nformaton or data contaned heren. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors make any clam, predcton, warranty or representaton whatsoever, expressly or mpledly, ether as to the results to be obtaned from the use of the FTSE TMX Canada Floatng Rate Note (FRN) Index or the ftness or sutablty of the Index for any partcular purpose to whch t mght be put. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors provde nvestment advce and nothng n ths document should be taken as consttutng fnancal or nvestment advce. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors make any representaton regardng the advsablty of nvestng n any asset. A decson to nvest n any such asset should not be made n relance on any nformaton heren. Indexes cannot be nvested n drectly. Incluson of an asset n an ndex s not a recommendaton to buy, sell or hold that asset. The general nformaton contaned n ths publcaton should not be acted upon wthout obtanng specfc legal, tax, and nvestment advce from a lcensed professonal. No part of ths nformaton may be reproduced, stored n a retreval system or transmtted n any form or by any means, electronc, mechancal, photocopyng, recordng or otherwse, wthout pror wrtten permsson of the applcable member of the LSE Group. Use and dstrbuton of the LSE Group ndex data and the use of ther data to create fnancal products requre a lcence wth FTSE, Russell, FTSE TMX, MTSNext and/or ther respectve lcensors.. FTSE Russell FTSE TMX Canada Floatng Rate Note (FRN) Index, v2.0, January of 13