Ground Rules. FTSE-BOCHK Offshore RMB Bond Index Series v1.6

Transcription

1 Ground Rules FTSE-BOCHK Offshore RMB Bond Index Series v1.6 ftserussell.com March 2018

2 Contents 1.0 Introduction Management Responsibilities Eligibility Criteria Index Calculation Periodic Review of Constituents Appendix A: List of Sub-Indexes Appendix B: Further Information FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

3 Section 1 Introduction 1.0 Introduction 1.1 FTSE-BOCHK Offshore RMB Bond Index Series The FTSE-BOCHK Offshore RMB Bond Index Series consists of the FTSE-BOCHK Offshore RMB Bond Index and its four sub-indexes: FTSE-BOCHK Offshore RMB Chinese Sovereign Bond Index FTSE-BOCHK Offshore RMB Investment Grade Bond Index FTSE-BOCHK Offshore RMB High Yield and Unrated Bond Index FTSE-BOCHK Offshore RMB 1-3 Years Central Government Bond Index 1.2 Ground Rules This document sets out the Ground Rules for the construction and management of the FTSE-BOCHK Offshore RMB Bond Index Series. 1.3 Index series objectives The objective is to provide a series of indexes that track the performance of RMB-denominated bonds issued and settled outside the People s Republic of China. 1.4 Indexes The FTSE-BOCHK Offshore RMB Bond Index Series is calculated on an end-of-day basis and published at the end of each Hong Kong business day. 1.5 Index Methodology The purpose of the family of the FTSE-BOCHK Offshore RMB Bond Index Series is to measure the performance of RMB-denominated bonds issued and settled outside the People s Republic of China. The indexes are reviewed on a monthly basis. At this review bonds may be removed or added to the indexes. 1.6 Total Return Index A total return index is calculated for all the indexes. The total return index takes into account the price changes, interest accrued and coupon payments of each bond. The full amount of coupon receipts and interim cash flows of each bond are treated as cash earning zero interest intra-month and will be reinvested in the index at the monthly review Same day settlement is applied to all index calculations. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

4 1.7 FTSE Russell FTSE Russell is a trading name of FTSE International Limited, Frank Russell Company, and FTSE TMX Global Debt Capital Markets Limited and its subsidiaries (including MTSNext Limited). FTSE International Limited is the administrator of all FTSE Russell indexes. 1.8 FTSE Russell hereby notifies users of the index 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 and therefore, any financial contracts or other financial instruments that reference the index or investment funds which use the index to measure their performance should be able to withstand, or otherwise address, the possibility of changes to, or cessation of, the index. 1.9 Index users who choose to follow this index or to buy products that claim to follow this index should assess the merits of the index s 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 nor its subsidiary undertakings (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. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March 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 series FTSE is responsible for the daily calculation, production and operation of the FTSE-BOCHK Offshore RMB Bond Index Series and will: maintains records of all the constituents; be responsible for the addition and deletion of bonds and changes of nominal amounts, in accordance with the Ground Rules. 2.2 Amendments to these Ground Rules These Ground Rules shall be subject to regular review 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 Product Governance Board before approval is granted In the event that FTSE Russell considers that an exception should be made to any of the Ground Rules, market participants will be provided with clear and significant notice. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March 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 Guide to the Calculation Methods for the FTSE Fixed Income Indexes For a description of the methodology used to calculate the index and bond level analytics, please consult the Guide to Calculation Methods for FTSE Fixed Income indexes, which can be found using the following link: FTSE_Fixed_Income_Index_Guide_to_Calculation.pdf FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

7 Section 4 Eligibility Criteria 4.0 Eligibility Criteria 4.1 Security Type All RMB-denominated bonds that are issued and settled outside the People s Republic of China Fixed rate bonds and zeros are included. The following bonds are excluded from the indexes: Bonds with equity-type features (e.g. warrants, convertibles and contingent capital securities) Bonds with option-type features (e.g. callable and putable). For the avoidance of doubt, this does not include bonds with make-whole call or poison put provisions which are eligible. Certificates of deposit Floating rate notes Inflation-linked bonds Securitised bonds (e.g. MBS, ABS and covered) Private placements or bonds without a reliable daily pricing source Synthetic bonds Defaulted bonds 4.2 Minimum Nominal Issuance of a Bond A minimum outstanding face value of RMB 500 million is required for inclusion. 4.3 Issuers Any entity regardless of its place of incorporation or ownership. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

8 4.3.2 Qualifying issues will be allocated to the following indexes by issuer: Index FTSE-BOCHK Offshore RMB Bond Index FTSE-BOCHK Offshore RMB Chinese Sovereign Bond Index FTSE-BOCHK Offshore RMB Investment Grade Bond Index FTSE-BOCHK Offshore RMB High Yield and Unrated Bond Index FTSE-BOCHK Offshore RMB 1-3 Years Central Government Bond Index Issuer Any entity regardless of its place of incorporation or ownership The Central Government or the policy banks in the People s Republic of China The Central Government, the policy banks in the People s Republic of China, the Hong Kong SAR Government or those rated as investment grade Those rated below investment grade or unrated (excluding the Central Government, the policy banks in the People s Republic of China, the Hong Kong SAR Government) The Central Government 4.4 Maturities The maturities are: Index FTSE-BOCHK Offshore RMB Bond Index FTSE-BOCHK Offshore RMB Chinese Sovereign Bond Index FTSE-BOCHK Offshore RMB Investment Grade Bond Index FTSE-BOCHK Offshore RMB High Yield and Unrated Bond Index FTSE-BOCHK Offshore RMB 1-3 Years Central Government Bond Index Maturity 1 year 1 year 1 year 1 year 1 to 3 years (inclusive) 4.5 Credit Rating Pursuant to Rule 4.3.2, the following bonds are eligible for inclusion in the FTSE-BOCHK Offshore RMB Investment Grade Bond Index: Bonds issued by the Central Government or the policy banks in the People s Republic of China Bonds issued by the Hong Kong SAR Government Bonds rated as investment grade FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

9 4.5.2 Investment grade Issue-level ratings from each of the major rating agencies, where available, will be used to derive a FTSE composite rating for each bond. The FTSE composite rating is calculated with rating notches removed and will determine whether a bond that is not issued by the Central Government, the policy banks or the Hong Kong SAR Government is eligible for the investment grade index. FTSE Composite Rating Moody's Agency Equivalent Ratings S&P AAA Aaa AAA AA Aa3 to Aa1 AA- to AA+ A A3 to A1 A- to A+ BBB Baa3 to Baa1 BBB- to BBB+ If a bond is rated by at least one rating agency, the following procedure will be used to determine the FTSE composite rating: If only one rating is available, use that rating as the composite rating. If two ratings are available, and they are different, use the lower rating of the two. Ratings at or above BBB/Baa are considered investment grade. If the lowest rating is below investment grade the bond will not be eligible for the index The following bonds are eligible for inclusion in the FTSE-BOCHK Offshore RMB High Yield and Unrated Bond Index: Bonds with FTSE Composite Rating lower than BBB Bonds with no FTSE Composite Rating FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

10 Section 5 Index Calculation 5.0 Index Calculation 5.1 Price sources The methodology and availability of the price sources ensure a single price for each bond in the index. Average bid prices at 17:00 HKT obtained from the market and verified by BOCHK are used in the calculation of the indexes In circumstances such as severe market disruption where pricing is not available FTSE Russell reserves the right to carry over the price from the last business day. 5.2 Bond and Index Level Calculations Price and total return indexes are calculated for each Index Series. Additionally, the following analytics will be calculated at the index or individual constituent level. Coupon Semi and Annual Yield Time to Maturity Macaulay Duration Modified Duration Modified Convexity Notional/Market Value Accrued Interest Cash Payments The number of bonds in each Index The calculation methodology for the above analytics is detailed in A calculation guide on FTSE Fixed Income Indexes, which can be found using the following link: FTSE_Fixed_Income_Index_Guide_to_Calculation.pdf 5.3 Index Settlement The index series will assume the T+0 settlement convention for the valuation of the index constituents, and the calculation of index analytics. 5.4 Index Weighting The indexes will be market value weighted, this means that the weight of each bond in the index will be dependent on the notional amount outstanding, its price and any accrued interest. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

11 Section 6 Periodic Review of Constituents 6.0 Periodic Review of Constituents 6.1 Review dates The FTSE-BOCHK Offshore RMB Bond Index Series will be reviewed on a monthly basis. Review changes are implemented after the close of the last business day of the review month and become effective from the open of the first business day of the following month. 6.2 Addition of constituents New issues launched on or before the 15th calendar day (or the previous business day if the 15th is a non-hong Kong business day) and with the first settlement date on or before the 5th business day before the end of the review month will be included. New issues launched after the 15th calendar day (or the previous business day if the 15th is a non-hong Kong business day) or those with the first settlement date after the 5th business day before the end of the review month will be eligible for inclusion at the review in the following month. 6.3 Removal of constituents If a constituent becomes ineligible, it will be removed from the index at the close on the last business day of the month If a constituent becomes ineligible due to default, all bond level calculation analytics, including accrued interests, yields, and durations, will be set to zero immediately after the announcement until the end of the month. The default bond price is taken as normal on a daily basis. If no bid price is available the last available bid price is rolled forward If a constituent becomes ineligible other than due to default it will be removed at the monthly review. 6.4 Alterations to constituent attributes Alterations to nominal amounts outstanding and credit ratings are reflected at the monthly review. Nominal amount and credit rating changes that occur before the 5th business day before the end of the month will be reflected at the monthly review. Nominal amount and credit rating changes that occur on or after the 5th business day before the end of the month will be reflected at the review in the following month. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

12 6.5 Announcement of the review results The review results will be announced five business days prior to the implementation date. In the event of extended public holidays such as the Chinese New Year, a minimum of three business days will be provided. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

13 Appendix A: List of Sub-Indexes Below is a list of the indexes which are calculated as a part of the FTSE-BOCHK Offshore RMB Bond Index Series. FTSE-BOCHK Offshore RMB Bond Indexes: FTSE-BOCHK Offshore RMB Bond Index FTSE-BOCHK Offshore RMB Chinese Sovereign Bond Index FTSE-BOCHK Offshore RMB Investment Grade Bond Index FTSE-BOCHK Offshore RMB High Yield and Unrated Bond Index FTSE-BOCHK Offshore RMB 1-3 Years Central Government Bond Index FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14

14 Appendix B: Further Information A Glossary of Terms used in FTSE Russell s Ground Rules documents can be found using the following link: Glossary.pdf Further information on the FTSE-BOCHK Offshore RMB Bond Index Series is available from FTSE Russell. For contact details please visit the FTSE Russell website or contact FTSE Russell client services at info@ftserussell.com. 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 ), (4) MTSNext Limited ( MTSNext ), (5) Mergent, Inc. ( Mergent ), (6) FTSE Fixed Income LLC ( FTSE FI ) and (7) The Yield Book Inc ( YB ). All rights reserved. The FTSE-BOCHK Offshore RMB Bond Index Series is calculated by or on behalf of FTSE or its affiliate, agent or partner. FTSE Russell is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. FTSE, Russell, FTSE Russell MTS, TMX, FTSE4Good, ICB, Mergent, WorldBIG, USBIG, EuroBIG, AusBIG, The Yield Book 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, FTSE TMX, Mergent, FTSE FI or YB. TMX is a registered trade mark of TSX Inc. 中銀香港 BOCHK is a trade mark of Bank of China (Hong Kong) Limited. 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 (including Bank of China Hong Kong Limited) 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-BOCHK Offshore RMB Bond Index Series or the fitness or suitability of the Index Series 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 (including Bank of China Hong Kong Limited) 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, Mergent, FTSE FI, YB and/or their respective licensors. FTSE Russell FTSE-BOCHK Offshore RMB Bond Index Series, v1.6, March of 14