FTSE FAQ Document October 2013 FTSE Global Equity Index Series Move to Semi- Annual Reviews in 2014 FAQ Overview From March 2014, the FTSE Global Equity Index Series (GEIS) will move to a semi-annual review in March and September. This replaces the previous annual review that was split into four staggered individual regional reviews. From March 2014, all regions will be reviewed collectively, on a semi-annual basis. The semi-annual review process will allow FTSE to achieve a balance between targeting accuracy of index representation and on-going turnover. In addition, from March 2014, FTSE will extend the implementation notice period for FTSE GEIS to provide clients a longer notice period to prepare for the trades involved following each review. The notice period of review files for FTSE GEIS will be extended to provide an extra 5 business days notice, from T+7 to T+12. To accommodate this change, the committee meetings and reference data-cut-off dates will be moved back by a week. FTSE is making these changes in response to feedback from market practitioners, and after ratification by the FTSE Policy Group at their meeting on 24 September 2013.
1. What change is planned for GEIS review scheduling? The index review scheduling for the FTSE Global Equity Index Series (GEIS) will move away from individual annual regional reviews to all regions being reviewed collectively semi-annually in March and September. The semi-annual review process will allow FTSE to achieve a balance between targeting accuracy of index representation and on-going turnover. Original Schedule: Review Month Region(s) to be Data Taken as of Reviewed March Asia Pacific ex Japan Last business day in December June September Latin America Emerging Europe Middle East & Africa Developed Europe Japan Last business day in March Last business day in June December North America Last business day in September New 2014 schedule: Review Month March September Region(s) to be Reviewed Asia Pacific ex Japan Latin America Emerging Europe Middle East & Africa Developed Europe Japan North America Asia Pacific ex Japan Latin America Emerging Europe Middle East & Africa Developed Europe Japan North America Data Taken as of Last business day in December Last business day in June 2
2. How was this decision made? This decision was taken following approval from the three regional committees and subsequent ratification by the FTSE Policy Group. 3. What is the FTSE Policy Group? The Policy Group is made up of leading investment market professionals from around the world who serve in a personal capacity. Members of the FTSE Policy Group are chosen for their ability to provide strategic input to the development of FTSE indices and are typically Chief Investment Officer level or equivalent. 4. When will the change take place? The next annual review will be in March 2014. This will be followed by the first semi-annual review in September 2014 and then March and September thereafter. 5. What will be the data cut-off date for the semi-annual reviews in March and September? March review data cut-off will be the last business day in December. September review data cut-off will be the last business day in June. 6. Will the liquidity testing period change? Yes, a full 12 month liquidity test will be conducted in both the March and September semi-annual reviews. New testing periods: Review Month March September Liquidity testing period First business day of January to last business day of December First business day of July to last business day of June 3
For illustration purposes: Liquidity testing period for the March 2014 review will be from 2 January 2013 to 31 December 2013. 7. What happens in June and December? All normal quarterly changes such as 1% shares in issue updates, Industry Classification Benchmark (ICB) updates, capping, free float changes and IPOs which failed to qualify as fast entrants will continue to be processed in June and December. Please note: (a) Fast exit deletions will only be processed at a semi-annual review. (b) There will no longer be a re-assessment of Large/Mid/Small status of existing index constituents which have been subject to a merger/spin-off in June and December. 8. Will IPOs be assessed outside of a semi-annual review? Yes, as well as being reviewed at semi-annual reviews, IPOs from all regions (which failed to qualify as fast entrants) will also be reviewed in June and December. 9. What market capitalisation cut-off will be used to determine IPO eligibility in June and December? Index membership of eligible IPOs will be determined by referencing the full company market capitalisation at close on *11 May or *11 November (as appropriate), against the entry levels for Large, Mid, Small as set in the March or September review (as appropriate), index adjusted to reflect the subsequent change in performance of the appropriate regional index. (*)The previous trading day s data will be taken if any of the dates above are on a non trading day. 4
10. For each quarter, what is the IPO period under review? Review Month IPO period assessed (dd/mm/yyyy) March 2014 13/08/2013 31/12/2013 June 2014 02/10/2013 09/05/2014 September 2014 11/02/2014 30/06/2014 December 2014 02/04/2014 11/11/2014 For illustration purposes, for the March 2014 review the cut-off date for index data is 31 December 2013. However, only those IPOs with 3 months liquidity as at 31 December 2013 will be considered for index inclusion in March 2014. Therefore in order to meet the minimum 3 month trading requirement an IPO would need to have listed by 1 October 2013. In June 2014, IPOs listed between 2 October 2013 and the cut off date (i.e. 9 May 2014) will be assessed for index eligibility. 11. In order to meet the 3 month trading requirement, by which date must an IPO be listed? Review Month IPO cut-off to meet 3 month trading criteria(dd/mm/yyyy) March 2014 01/10/2013 June 2014 10/02/2014 September 2014 01/04/2014 December 2014 12/08/2014 Please refer to ground rule 6.5 C below: New issues which do not have a twelve month trading record must have a minimum three month trading record when reviewed. They must turnover at least 0.05% of their shares in issue (after the application of any free float weightings) based on their median daily trade per month in each month since their listing. 5
12. How is the liquidity test conducted for IPOs which have a trading record greater than 3 months but less than 12 months when reviewed? The liquidity test will be applied on a pro-rata basis where the testing period is greater than 3 months but less than 12 months. As an example, if Company A passes 5 out of 6 months it will be considered to have passed the test as this equates to passing 10 out of 12 months. Months Tested Minimum Monthly Pass Rate Required 1 month 1 month 2 months 2 months 3 months 3 months 4 months 4 months 5 months 5 months 6 months 5 months 7 months 6 months 8 months 7 months 9 months 8 months 10 months 9 months 11 months 10 months 12 months 10 months For each quarter, what is the IPO period under review? Example: March 2014 review 13 AUG 01 OCT 31 DEC IPO PERIOD ASSESSED JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR To meet the minimum 3 months trading requirement, an IPO would need to have listed by 1 Oct For the March 2014 review, the cut-off date for index data is 31 Dec 6
13. Where can I find the market capitalisation adjusted entry levels? The index adjusted levels will be published on the FTSE website. The FTSE Notice is entitled: FTSE Global Equity Index Series Inclusion and Exclusion Levels mmmm yyyy 14. Will newly eligible stocks be reviewed in June and December? No. Only IPOs will be reviewed. For illustration purposes, a non-constituent moving to an eligible market will only be reviewed for eligibility at the next semi-annual review. 15. Will the move to semi-annual reviews impact the committee meeting dates? Yes, the three regional committee meetings will in future be held on the same date (expected to be the Wednesday before the first Friday of March, June, September and December). Following approval by the committees, the index review changes will be announced to the market after close of the respective regions on the date of the committee meeting. The committee meeting dates have been moved back by a week in order to satisfy client request for a longer notice period between the announcement and the effective date of rebalance changes. 16. Will there be any impact to the rebalance effective date? No, the rebalance effective date will remain unchanged (see rule below). 7
9.1.3 Implementation of any quarterly changes will happen after the close of business on the third Friday in March, June, September or December. 17. Will there be any other data cut-off changes? Yes, FTSE will introduce a cut-off for quarterly 1% shares in issue and free float changes. The cut-off will be the third Wednesday of the month prior to the review month. This aims to provide greater transparency of prospective changes. For illustration purposes, if the review month is June, the cut-off date will be the third Wednesday in May. 18. What will be the timing of free float and share changes which breach the 3%/10%/USD2bn rules if announced after the above cut-off date? Any corporate event driven free float or share change (e.g. resulting from equity offering or secondary placing) will be processed as follows: Where T+5 implementation falls before the index review committee meeting date (i.e. Wednesday before first Friday of the review month) Implemented on date as per T+5 notice Where T+5 implementation falls after the index review committee meeting date but before the index review effective date (i.e. after close of third Friday in the review month) Where T+5 implementation falls after the index review effective date (i.e. after close of third Friday in the review month) Implemented on index review effective date However, in exceptional circumstances FTSE may use its discretion to reduce the notice period to the minimum T+5 Implemented on date as per T+5 notice However, in the event that T+5 is in close proximity to an index review, FTSE may use its discretion to reduce the notice period to a minimum T+2 in order to apply the change at the index review date 8
19. FTSE GLOBAL EQUITY INDEX SERIES REVIEW SCHEDULE 2014 Semi-Annual March 2014 June 2014 Semi-Annual September 2014 December 2014 Index Rebalance Market Cap data cut-off 31 December 2013 n/a 30 June 2014 n/a ICB Review 6 February 2014 8 May 2014 7 August 2014 5 November 2014 Quarterly Free float changes cut-off (only updates captured up to this date will be processed at the index review) 19 February 2014 21 May 2014 20 August 2014 19 November 2014 Quarterly 1% SII changes cut-off (only updates captured up to this date will be processed at the index review) 19 February 2014 21 May 2014 20 August 2014 19 November 2014 Release of Indicative Files (FF & 1% SII updates) 26 February 2014 28 May 2014 27 August 2014 26 November 2014 Release of Final Files (FF & 1% SII updates) - incorporates any revisions to indicative file 5 March 2014 4 June 2014 3 September 2014 3 December 2014 Liquidity Screen Period 2 January 2013 to 31 December 2013 n/a 1 July 2013 to 30 June 2014 n/a IPO Review Period 13 August 2013 to 31 December 2013 2 October 2013 to 9 May 2014 11 February 2014 to 30 June 2014 2 April 2014 to 11 November 2014 IPO Market cap cut-off 31 December 2013 9 May 2014 30 June 2014 11 November 2014 IPO cut-off in order to meet 3 month minimum trading requirement 1 October 2013 10 February 2014 1 April 2014 12 August 2014 Fast Exit Deletions cut-off 31 December 2013 n/a 30 June 2014 n/a Committee Meetings (Three regional meetings on the one day) 5 March 2014 4 June 2014 3 September 2014 3 December 2014 FTSE Notice of Regional Changes Circulated (Three notices, one after each regional committee meeting) 5 March 2014 4 June 2014 3 September 2014 3 December 2014 Review Products circulated 5 March 2014 4 June 2014 3 September 2014 3 December 2014 Review Effective Date 24 March 2014 23 June 2014 22 September 2014 22 December 2014 9
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