Guideline relating to JRC FX-G10 Quant Index

Transcription

1 Guideline relating to JRC FX-G10 Quant Index Version 1.0 dated May 24th, 2017 ISIN: DE000A2GF7M0 Bloomberg: CIMSJRC 1

2 Important Information The general rules of the JRC FX-G10 Quant Index (the Index ) as of October 2016 are set out in full below. It should be noted that the general rules of the Index may be updated or amended from time to time. In managing the Index, the Index Sponsor will, subject as provided below, employ the methodology described below and its application of such methodology shall be conclusive and binding. No assurance can be given that fiscal, market, regulatory, juridical, financial or other circumstances will not arise that would, in the view of the Index Sponsor, necessitate or make desirable a modification of or change to such methodology and the Index Sponsor shall be entitled to make any such modification or change any of the provisions of the Index as set out in the general rules of the Index as it deems fit. The Index Sponsor may also make modifications to the terms of the Index in any manner that it may deem necessary or desirable, including (without limitation) to correct any manifest or proven error to cure, correct or supplement any ambiguity or defective provision contained in this description of the Index. Any such modification or change will take effect accordingly and will be deemed to update these general rules of the Index from its effective date. This document is communicated by Index Sponsor. All information provided herein is for information purposes only and no warranty is made as to its fitness for purpose, satisfactory quality or otherwise. Every effort has been made to ensure that all information given is accurate, but no responsibility or liability (including in negligence) can be accepted by the Index Sponsor for errors or omissions or for any losses arising from the use of this information. The information presented herein has been prepared on the basis of the publicly available information, internally developed data or other third party sources believed to be reliable. All opinions and views constitute judgments as of the date of the writing and are subject to change at any time without notice. This document is not an invitation to make an investment in a product based upon the Index (the Index-linked Product ) nor does the information, recommendations or opinions expressed herein constitute an offer for sale of an Index-linked Product. 2

3 Contents Introduction 1 Index Specifications 1.1 Name and ISIN 1.2 Initial Value 1.3 Distribution 1.4 Prices and Calculation Frequency 1.5 Weighting 1.6 Decision-making Bodies 1.7 Publication 1.8 Historical Data 1.9 Licensing 2 Composition of the Index 2.1 Selection of the Index Components / Index Construction 2.2 Classification / Index Sectors (removed) 2.3 Qualification (removed) 2.4 Strategy Selection and Fund Allocation 2.5 Changes to Index Components 3 Calculation of the Index 3.1 Index Formula 3.2 Accuracy 3.3 Adjustments 4 Appendix 4.1 Contact Data 4.2 Calculation of the Index Change in Calculation Method This document contains the underlying principles and regulations regarding the structure and the operating of the JRC FX-G10 Index (the Index ). The JRC FX-G10 Quant Index is the sole property of JRC Capital Management Consultancy & Research GmbH. Chartered Investment Germany GmbH as the Index Calculation Agent strives to the best of its ability to ensure the correctness of the calculation. There is no obligation for Chartered Investment Germany GmbH irrespective of possible obligations to issuers to advise third parties, including investors and/or financial intermediaries, of any errors in the index. The calculation and publication of the index by JRC Capital Management Consultancy & Research GmbH or Chartered Investment Germany GmbH is no recommendation for capital investment and does not contain any assurance or opinion of either regarding a possible investment in a financial instrument based on this index. 3

4 Introduction This document is to be used as a guideline with regard to the composition, calculation and management of the JRC FX-G10 Quant Index. Any changes made to the guideline are initiated by the decision-making bodies specified in section 1.6. The JRC FX-G10 Quant Index is the sole property of JRC Capital Management Consultancy & Research GmbH (the Index Sponsor and the Index Management Agent ). The JRC FX-G10 Quant Index is calculated by Chartered Investment Germany GmbH (the Index Calculation Agent ). The Index is designed as an investable index and therefore adjusted for performance deviations while replicating the index. 1 Index Specifications The Index is a rules-based, technically driven index engineered for the global FX markets. The objective of the Index is to replicate the risk and return characteristics of a quantitative, technical and systematic investment strategy that trades a diversified portfolio of currencies. The objective of the strategy is to generate absolute capital growth through systematically trading highly liquid currency pairs. The investment Strategy focuses on the most liquid currency pairs with various data representation and trading horizons, which can be short-, medium- or long term. The selection and allocation of the assets is carried out with a focus on optimal de-correlation with worldwide stocks and bond indices. The total portfolio is regularly rebalanced and its composition adjusted to the changing market conditions. The Index is a Total Return Index, i.e. profits will be reinvested in the index. 1.1 Name and ISIN The JRC FX-G10 Quant Index is distributed under ISIN DE000A2GF7M0. The Index is published in Bloomberg under the code CINMJRC. 1.2 Initial Value The Index will be calculated every Business Day starting on January, 2 nd, The index was based on as at the close of trading on this date. 1.3 Distribution The Index Value of the JRC FX-G10 Quant Index is published by Chartered Investment Managers PTE LTD. via Bloomberg under the code CINMJRC and on Chartered Investment s website under as of each Index Valuation Date no later than three business days following the respective Index Valuation Date. 1.4 Prices and Calculation Frequency The Index is calculated based on the net asset value of the respective Index Components. The Index is calculated once every Business Day. In the event that data cannot be provided or that there are troubles regarding the price marketing of Chartered Investment Germany GmbH the Index cannot be distributed. 4

5 1.5 Weighting The Index Components are weighted as a fraction of the overall Index Value. The weighting methodology may be amended by the Decision-making bodies if required due to legal framework. 1.6 Decision-making Bodies The Index Sponsor appoints the Index Calculation Agent and the Index Management Agent. Adjustments to the Index Value are determined by the Index Calculation Agent in its sole discretion. 1.7 Publication All specifications and information relevant for calculating the index will be made available on the web page and sub-pages. 1.8 Historical data Historical data will be maintained from the launch of the Index on January, 2 nd Licensing Licences to use the index as the underlying value for derivative instruments are issued to stock exchanges, banks, financial services providers and investment houses by JRC Capital Management Consultancy & Research GmbH. 5

6 2 Composition of the Index 2.1 Selection of the Index Components / Index Construction The Index Management Agent is responsible for maintaining and evolving the rules for the construction of the Index and ensures that a consistent approach is applied when selecting the components to be included in the Index. To select the components for inclusion in the Index, the Index Management Agent has designed a proprietary methodology that forms the basis of a disciplined, rules-based selection process with a focus on diversification. The diversification of the traded portfolio takes place on 3 different levels. the methodical level, combining a variety of different approaches the investment universe consisting of the most liquid currency pairs and the time frames varying between short-, medium- and longterm data representation Investment Universe USD/ CAD EUR/ USD AUD/ USD USD/ JPY AUD/ JPY GBP/ JPY EUR/ AUD EUR/ JPY EUR/ NZD GBP/ USD 6

7 Long term systems Data representation: 240 minutes - daily Trading horizon: 1 day - 3 weeks Medium term systems Short term systems Data representation: 60 minutes minutes Trading horizon: 1 hour - 3 days Data representation: 5 minutes - 60 minutes Trading horizon: few minutes - 12 hours Investment Universe Trading Approaches Timing factor JRC FX-G10 Quant Strategy Following the selection of the index constituents, the Index Management Agent applies a proprietary allocation model, subject to compliance with pre-defined composition restrictions to determine the allocation to the index components and the strategies. However, there is no assurance that this allocation will achieve the Index objective. The allocation model benefits from continuing research and development of the Index Management Agent to extend the range and versatility of trading strategies and currency pairs accessed by the index. As such, the Index Management Agent may over time increase and change the number and diversity of currency pairs, trading models and time horizons initially allocated to by the Index as well as refine and deploy new allocation models where appropriate. Following its initial composition, the Index Management Agent will review the composition of the Index on an ongoing basis. Index constituents may be added to the Index if they have 7

8 satisfied the Index qualification criteria or may be removed for failing to continue to satisfy the Index qualification criteria. 2.4 Strategy Selection and Fund Allocation The Index Management Agent employs a proprietary quantitative and systematic model in order to determine the selection of instruments and allocations to the index components to be included in the index. The final decision about the selection of currency pairs, strategies and their weighting within the portfolio is the result of a complex iterative process consisting of four steps: systematic model tests, portfolio evaluation, continuous risk monitoring, and portfolio re-allocation. The development process of each stand-alone strategy ends with a profound performance evaluation. Since a crucial development goal is that strategies show a stable performance under changing market conditions, a test focus lies on parameter robustness. By the end, for each strategy a profile consisting of Key Performance Indicators (KPI) is being fixed, together with allowable ranges for deviations. This profile will serve as a reference during the strategy s whole life-cycle. In a second step, an evaluation of the combination of the identified candidate strategies takes place on the portfolio level. As a boundary condition, a maximum diversification in terms of asset correlation, time frame and decision algorithms has to be taken into account for the selection process. Finally, a detailed risk/reward analysis and the inspection of several what-if scenarios lead to the determination of the optimal asset allocation for each strategy. Day-to-day performance monitoring is key to recognizing the risk of de-stabilization and changing market conditions in time. Regular strategy evaluations and comparison with its profile ensure, that each of its KPIs is still within the predefined acceptable range. This test serves as an early warning system. If it was detected that one KPI has left its allowable range, the weight of that strategy within the portfolio is reduced immediately and an adaptation process is being started. Often it is sufficient to slightly re-adjust the strategy s parameters in order to arrive at a new stable strategy. However, if no successful adaptation could be found, the decision to completely deactivate the strategy will be made. In most cases, it can be replaced by another strategy on the same currency pair or a closely related one. In any case, after each change in the strategy composition a re-evaluation of the Portfolio has to be carried out and eventually a re-allocation of weights for the remaining assets. Composition Restrictions To ensure that the index is sufficiently diversified, it is composed in a way that the allocation to one single currency pair may not represent more than 25% of the index. The number of trading strategies within the index may vary over the time. In the case of a total indexallocation of 100% the number of trading strategies will not be less than 8. Compliance with the composition restrictions of the index is reviewed by the index management agent on a daily basis upon the latest available data. Changes arising from the daily review will be implemented as quickly as practicably possible. 8

9 2.5 Changes to Index Components The Index Management Agent may determine Index Components solely from the full universe of possible Index Components according to the Allocation Model. The total number of index components may vary through time in accordance with this index description. An index component may be removed from the index if it is in breach of any of the index qualification rules or generally ceases to qualify for inclusion in the index. Index components can also be removed from the index in order to ensure that, at all times, the index continues to meet its index objective or composition restrictions. Once the allocations of removed index components are determined, the respective allocation of some or all of the remaining index components may be adjusted accordingly. If an index component is removed from the index a replacement index component may become eligible for inclusion and may be added to the index. However, it is not necessary for an existing index component to be removed in order for a newly eligible index component to be added. An index component may be added to the index if it qualifies for inclusion in the index. Index components can be added to the index in order to ensure that, at all times, the index continues to meet its index objective and composition restrictions. Once the allocations of newly added index components are determined, the respective allocation of some or all of the index components existing prior to the additions may be adjusted accordingly. 9

10 3 Calculation of the Index 3.1 Index Formula Effective as of each Business Day (each such an Index Valuation Date ), the Index Calculation Agent calculates the Index s official closing value. This calculation is based on the net asset value of the Index Components, as confirmed by the Index Calculation Agent by the respective broker where the index is replicated (each such valuation an Official Valuation ). The first Index Valuation date is January, 2 nd, The Index Calculation Agent will use the following formula to calculate the Index Value: Whereas: Index t = ti (W ti P ti ) A t F t Index t is the Index at time t. W ti is the number of units / weightings of an Index Component in the Index at time t. P ti is the Official Valuation of each Index Component at time t > 0. A t F t i is the adjustment factor, which is determined at the reasonable discretion of the Index Calculation Agent at the time t with reference to adjustments during the lifetime of the Index which may become necessary due to Adjustments described in 3.3 is the amount of the accrued index fees until t of up to 180 bp / days per annum x Index t 1 as determined by the Index Sponsor and published accordingly. Since launch of the Index to the date of publication of version 1.0 of the Index Guideline the Index fee is 0. is representing an individual Index Component. Indexfees: 0.375% of the Indexvalue at the last Exchange Trading Day of any quarter plus 20% of the positive difference of the Indexvalue of Day t, if this is the last Exchange Trading Day of a quarter, and the highest Indexvalue of the last Exchange Trading Day of the quarterly periods before. The Index Calculation Agent may for the sake of accuracy and efficiency rely for the calculation of the Index Value on account statements delivered to him from the custodian bank or the broker running the reference Account defined under Accuracy The value of the index will be rounded to two decimal places. 3.3 Adjustments Adjustments will be made for any fees, expenses, losses, interest, gains or taxes, which are observed by the 10

11 Index Calculation Agent on the Reference Account xxx at xxx replicating the Index against the theoretical performance. Adjustments will be made for any unsettled commitments for investment or de-investments into the Reference Account and may therefore lead to short-term variations in the investment-level. Market Disruptions In the event of a sustained market disruption that in the view of the Index Calculation Agent has a significant impact on the required minimum values underlying the quantitative criteria (e.g., if there are significant deviations of the current hypothetical returns of the JRC FX-G10 Quant Index compared to past hypothetical returns), the Index Calculation Agent may at its reasonable discretion update the Index or the Index formula (as defined in Section 3.1 above) in order to take into account the prevailing market conditions. Other Changes If necessary, the Index Calculation Agent may at its reasonable discretion amend these Index Rules in order to ensure achievement of the objective of the Index as defined in Section 1 of these Guidelines or to address any errors, omission or ambiguities. Such amendments may include changes to the eligibility requirements or the rules with respect to the composition, calculation and weighting of the Index. 11

12 4 Appendix 4.1 Contact Data Information regarding the JRC FX-G10 Quant Index JRC Capital Management Consultancy & Research GmbH Kurfürstendamm Berlin Phone: Calculation of the Index Change in Calculation Method The application by the Index Calculation Agent of the method described in this document is final and binding. The Index Calculation Agent shall apply the method described above for the composition and calculation of the index. However it cannot be excluded that the market environment, supervisory, legal, financial or tax reasons may require changes to be made to this method. The Index Sponsor may also make changes to the terms and conditions of the index and the method applied to calculate the index, which he deems to be necessary and desirable in order to prevent obvious or demonstrable error or to remedy, correct or supplement incorrect terms and conditions. Neither the Index Sponsor nor the Index Calculation Agent are obliged to provide information on any such modifications or changes. Despite the modifications and changes the Index Calculation Agent will take the appropriate steps to ensure a calculation method is applied that is consistent with the method described above. 12