Ground Rules. FTSE Single Commodity Index Series v1.1

Transcription

1 Ground Rules FTSE Single Commodity Index Series v1.1 ftserussell.com August 2017

2 Contents 1.0 Introduction Management Responsibilities FTSE Russell Index Policies Eligible Instruments Index Maintenance Calculation Methodology... 9 Appendix A: Glossary Appendix B: Rolling Schedule Appendix C: Further Information FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

3 Section 1 Introduction 1.0 Introduction 1.1 This document sets out the Ground Rules for the construction and management of the FTSE Single Commodity Index Series. 1.2 The FTSE Single Commodity Index Series consists of a set of benchmarks designed to reflect the performance of individual commodities using listed futures contracts. The FTSE Single Commodity Index Series consists of the following indexes: FTSE Gold Index FTSE Silver Index 1.3 An Excess Return Index and Total Return Index will be calculated on an end-of-day basis and published in US dollars. 1.4 The Excess Return Index reflects the performance of future contracts representing each FTSE Single Commodity Index and the discount or premium from rolling the front month contract on expiry. The rolling process is detailed in Rule The Total Return Index incorporates the performance of the Excess Return Index and an interest component reflecting fully collateralized futures contract positions. 1.6 These Ground Rules should be read in conjunction with the FTSE US Treasury Bill Index Series document that can be accessed using the following link: FTSE_US_Treasury_Bill_Index_Series.pdf 1.7 FTSE Russell FTSE Russell is a trading name of FTSE International Limited (FTSE), Frank Russell Company (Russell), FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, FTSE TMX ) and MTSNext Limited. FTSE, Russell and FTSE TMX are each benchmark administrators of indexes. References to FTSE Russell should be interpreted as a reference to the relevant benchmark administrator for the relevant index. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

4 1.8 FTSE Russell hereby notifies users of the index series that it is possible that circumstances, including external events beyond the control of FTSE Russell, may necessitate changes to, or the cessation, of the index series and therefore, any financial contracts or other financial instruments that reference the index series should be able to withstand, or otherwise address the possibility of changes to, or cessation of, the index series. 1.9 Index users who choose to follow this index series or to buy products that claim to follow this index series should assess the merits of the index series rules-based methodology and take independent investment advice before investing their own or client funds. No liability whether as a result of negligence or otherwise is accepted by FTSE Russell (or any person concerned with the preparation or publication of these Ground Rules) for any losses, damages, claims and expenses suffered by any person as a result of: any reliance on these Ground Rules, and/or any errors or inaccuracies in these Ground Rules, and/or any non-application or misapplication of the policies or procedures described in these Ground Rules, and/or any errors or inaccuracies in the compilation of the index or any constituent data in the index series. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

5 Section 2 Management Responsibilities 2.0 Management Responsibilities 2.1 FTSE International Limited (FTSE) FTSE is the benchmark administrator of the index FTSE is responsible for the daily calculation, production and operation of the FTSE Single Commodity Index Series and will: maintain records of all constituent instruments; make changes to the instruments and their weightings in accordance with the Ground Rules; carry out the periodic index reviews of the index series and apply the changes resulting from the reviews as required by the Ground Rules; publish changes to the constituent weightings resulting from their ongoing maintenance and the periodic reviews; disseminate the indexes. 2.2 Amendments to these Ground Rules These Ground Rules shall be subject to regular review by FTSE Russell to ensure that they continue to meet the current and future requirements of investors and other index users. Any proposals for significant amendments to these Ground Rules will be subject to consultation with FTSE Russell advisory committees and other stakeholders if appropriate. The feedback from these consultations will be considered by the FTSE Russell Governance Board before approval is granted. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

6 Section 3 FTSE Russell Index Policies 3.0 FTSE Russell Index Policies These Ground Rules should be read in conjunction with the following policy documents which can be accessed using the links below: 3.1 Index Policy for Trading Halts and Market Closures Guidance for the treatment of index changes in the event of trading halts or market closures can be found using the following link: FTSE_Russell_Index_Policy_for_Trading_Halts_and_Market_Closures.pdf 3.2 Index Policy in the Event Clients are Unable to Trade a Market Details of FTSE Russell s treatment can be accessed using the following link: FTSE_Russell_Index_Policy_in_the_Event_Clients_are_Unable_to_Trade_a_Market.pdf 3.3 FTSE Russell Policy for Benchmark Methodology Changes Details of FTSE Russell s policy for making benchmark methodology changes can be accessed using the following link: FTSE_Russell_Policy_for_Benchmark_Methodology_Changes.pdf FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

7 Section 4 Eligible Instruments 4.0 Eligible Instruments Commodities eligible for the FTSE Single Commodity Index Series are listed below and are referred to as the Eligible Instruments. Table 1: The Eligible Instruments - FTSE Single Commodity Index Series Index Eligible Instrument Exchange Exchange Symbol Delivery Months Traded FTSE Gold Index Gold 100oz Future COMEX GC 2,4,6,8,12 FTSE Silver Index Silver Future COMEX SI 3,5,7,9,12 FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

8 Section 5 Index Maintenance 5.0 Index Maintenance 5.1 Calculation Frequency The FTSE Single Commodity Index Series is calculated on an end-of-day (EOD) basis at approximately 23:00 New York Time. 5.2 Holiday Calendar The indexes in the FTSE Single Commodity Index Series are calculated every Index Business Day. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

9 Section 6 Calculation Methodology 6.0 Calculation Methodology 6.1 Rolling Process Overview of the Roll Process The FTSE Single Commodity Index Series is designed to reflect the performance of individual commodities using available futures contracts. Therefore, periodically, a Front Month Contract that is approaching expiry or delivery must roll into the Next Month Contract. The rolling of each Eligible Instrument contract takes place over multiple Contract Business Days that are Index Business Days and are not affected by Market Disruption Events or Limit Days. This constitutes the Rolling Period. The index calculation during the Roll Period incorporates the price of both the Front Month and Next Month Contracts. The Next Month Contract is identified as the contract with the next available Delivery Month in the contract rolling schedule (see Table 3 in Appendix B) closest to the Front Month Contract. Upon completion of the rolling process, the Next Month Contract becomes the new Front Month Contract. Table 2: Roll Period and Timing - FTSE Single Commodity Index Series Index Name Commodity Contract Name Roll Calendar FTSE Gold Commodity Index Gold 100oz Schedule 1 Gold Future FTSE Silver Commodity Index Silver Silver Future Schedule 1 Schedule 1: Rolling starts on first Index Business Day of the month prior to the delivery month of the Front Month Contract, and spans 5 business days Roll Mechanism On each Contract Business Day that is not affected by a Market Disruption Event or a Limit Day during the Rolling Period, 1/n of the Front Month Contract is rolled into the Next Month Contract for a given contract, where n is the rolling period. If a Contract Business Day is a Limit Day or is affected by a Market Disruption Event during the Rolling Period, the rolling schedule will be extended to the next Contract Business Day Excess Return Daily Calculation The excess return for FTSE Single Commodity Index Series on Index Business Day tt is: FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

10 Where: rr tt EE = PPPPPPPPPPPPPPPPPPNN FF rr tt FF + PPPPPPPPPPPPPPPPPPNN NN rr tt NN [1] PPPPPPPPPPPPPPPPPPNN FF is the proportion of index represented by the Front Month Contract. During a non- Roll Period this is 1; during a Roll Period spanning n business days, this is nn ii on the i th day of the Roll Period. PPPPPPPPPPPPPPPPPPNN NN is the proportion of index represented by the Next Month Contract. During a non-roll Period this is 0; during a Roll Period spanning n business days, this is ii on the ith nn day of the Roll Period. nn rr tt EE rr tt FF rr tt NN is the return of the FTSE Single Commodity Index Series on day tt is the return of the Front Month Contract on day tt is the return of the Next Month Contract on day tt such that: rr FF tt = pp tt FF FF pp tt 1 FF [2] pp tt 1 rr NN tt = pp tt NN NN pp tt 1 NN pp [3] tt 1 Where: pp tt FF is the Settlement Price of the Front Month Contract on day tt pp tt NN is the Settlement Price of the Next Month Contract on day tt If day tt is a Limit Day for either the Front Month Contract or Next Month Contract the Limit Price will be used in place of the Settlement Price in the return calculation. If day tt coincides with a Market Disruption Event the Settlement Price from the previous Index Business Day will be used in the return calculation Total Return Daily Calculation The total return for FTSE Single Commodity Index Series on Index Business Day tt is: Where: rr tt TT = rr tt EE + PP tt PP tt 1 1 [4] rr tt TT rr tt EE PP tt is the total return of a FTSE Single Commodity Index on day tt is the excess return of a FTSE Single Commodity Index on day tt is the FTSE US Treasury Bill 1-3 Month Index level on day tt PP tt 1 is the FTSE US Treasury Bill 1-3 Month Index level on day tt 1 FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

11 6.2 Index Calculation Excess Return Index Level The excess return index level for FTSE Single Commodity Index Series on Index Business Day tt is: Where: II tt EE is the excess return index level on day tt II EE EE tt = II tt 1 (1 + rr EE tt ) [5] EE II tt 1 is the excess return index level on day tt 1 rr tt EE is the excess return on day tt Total Return Index Level The total return index level for FTSE Single Commodity Index Series on Index Business Day tt is: Where: II tt TT is the total return index level on day tt II TT TT tt = II tt 1 (1 + rr TT tt ) [6] TT II tt 1 is the total return index level on day tt 1 rr tt TT is the total return of a FTSE Single Commodity Index on day tt FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

12 Appendix A: Glossary COMEX Commodity Exchange Inc. Commodity Futures (Contract) a standardized contract, traded on a recognised Exchange, between two parties to buy or sell a commodity of standardised quantity and quality for a price agreed upon today with delivery and payment occurring at a specified future date, the delivery date. Contract Business Day a day when the exchange a contract trades on is open. Delivery Month the year and month at which physical delivery of the commodity associated with the contract occurs. Eligible Instruments commodities eligible for the single commodity index series. Front Month Contract the contract with the closest Delivery Month. Futures (Contract) a Commodity Futures Contract e.g. Coffee A. Index Business Day a day on which the index is calculated where at least one contract is traded based on the COMEX trading calendar. Ground Rules this document, covering the management and calculation of the FTSE Single Commodity Index Series. Limit Day a trading day where the price of a Futures Contract has moved to the limits set by the Exchange for that contract. Limit moves can be up or down. A Limit Day will lead to the postponement of contract Rolling and Rebalancing for the contract in question and the limit price is used in the index calculation. Limit Price the extreme up or down price set by the Exchange for a contract that cannot be exceeded. Market Disruption Event is an event on any Index Trading Day involving an Eligible Instrument where trading is disrupted and a settlement price is unavailable. A Market Disruption Event will lead to the postponement of contract Rolling and Rebalancing for the contract(s) in question and the previous day s settlement price will be used in the index calculation. Next Month Contract the contract with the second closest Delivery Month. Rolling Period the period between the start of the Rolling Process and the end of the Rolling Process. Rolling starting date and roll length will vary across commodities (Section 5). Rolling Process the process of simultaneously reducing the weighting in a Front Month Contract nearing expiry and increasing the weighting in the Next Month Contract until the weighting of the Next Month Contract reaches 100%. Settlement Price the official settlement price as published by the relevant exchange. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

13 Appendix B: Rolling Schedule Table 3: Eligible Instrument delivery months used to designate the next month contracts: Commodity Contract Name Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Delivery Months Used Gold Gold 100oz Future J J M M Q Q Z Z Z Z G G 2,4,6,8,12 Silver Silver Future H K K N N U U Z Z Z H H 3,5,7,9,12 FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14

14 Appendix C: Further Information A Glossary of Terms used in FTSE Russell s Ground Rule documents can be found using the following link: Glossary.pdf For further information on the FTSE Single Commodity Index Series Ground Rules visit or info@ftserussell.com. Contact details can also be found on this website London Stock Exchange Group plc and its applicable group undertakings (the LSE Group ). The LSE Group includes (1) FTSE International Limited ( FTSE ), (2) Frank Russell Company ( Russell ), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, FTSE TMX ) and (4) MTSNext Limited ( MTSNext ). All rights reserved. The FTSE Single Commodity Index is calculated by FTSE or its agent. All rights in the Index Series vest in FTSE. FTSE Russell is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. FTSE, Russell, FTSE Russell MTS, FTSE TMX, FTSE4Good and ICB and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX. All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Single Commodity Index or the fitness or suitability of the Index for any particular purpose to which it might be put. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence with FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors. FTSE Russell FTSE Single Commodity Index Series, v1.1, August of 14