Index Guideline Clarification | Solactive Canadian Bond Universe Indices, Solactive 1-5 Year Laddered Canadian Bond Indices, and Solactive Broad Canadian Bond Universe Indices  | Effective Date 21/01/2021

Today, on the 21/01/2021, Solactive announces the following clarification to the Index Guideline of the following indices (the ‘Affected Indices’):

Rationale for Index Guideline Clarification

Solactive has determined that it is necessary to provide clarification in the Index Guidelines for the Affected Indices to explicitly include in the Index Component Requirements bonds classified as Non-Viable Contingent Capital (NVCC). This will avoid any ambiguity, ensure that the Affected Indices are in line with Canadian market practice and continue to reflect the standard Canadian benchmark universe that they are intended to represent.

Changes to the Index Guideline

The following Methodology Changes will be implemented in the following points of the Index Guideline.

1.        Solactive Broad Canadian Bond Universe Indices

Section 2.1. Selection of the Index Components

From (old version):

“[…]

• Zero coupon bonds, pay in kind bonds, ABS, repackaged bonds, convertible bonds, MBS (except 1^st mortgages), inflation linked bonds, flat trading, hybrid and defaulted bonds are explicitly excluded.

[…].”

To (new version)

“[…]

• Zero coupon bonds, pay in kind bonds, ABS, repackaged bonds, convertible bonds, MBS (except 1^st mortgages), inflation linked bonds, flat trading, hybrid and defaulted bonds are explicitly excluded. For the avoidance of doubt, bonds issued by Financial Institutions which may be converted to equity only on the decision of the Office of the Superintendent of Financial Institutions (OSFI) in the case of a non-viability of the Issuer (so called Non-Viable Contingent Capital) are explicitly included in the index.

[…].”

2.       Solactive Canadian Bond Universe Indices

Section 4.1 index-specific definitions. 

From (old version):

“[…]

• Repackaged bonds, convertibles, mortgage backed securities (except 1st mortgages), other asset backed securities, inflation-linked securities, flat trading or defaulted securities are not eligible for inclusion.

[…].”

To (new version)

“[…]

• Repackaged bonds, convertibles, mortgage backed securities (except 1st mortgages), other asset backed securities, inflation-linked securities, flat trading or defaulted securities are not eligible for inclusion. For the avoidance of doubt, bonds issued by Financial Institutions which may be converted to equity only on the decision of the Office of the Superintendent of Financial Institutions (OSFI) in the case of a non-viability of the Issuer (so called Non-Viable Contingent Capital) are explicitly included in the index.

[…].”

3.      Solactive 1-5 Year Laddered Canadian Government/Corporate Bond Indices

Section 4.1 index-specific definitions

From (old version):

“[…]

• Repackaged bonds, convertibles, mortgage backed securities (this includes also 1st mortgages), other asset backed securities, inflation-linked securities, flat trading or defaulted securities are not eligible for inclusion.

[…].”

To (new version)

“[…]

• Repackaged bonds, convertibles, mortgage backed securities (this includes also 1st mortgages), other asset backed securities, inflation-linked securities, flat trading or defaulted securities are not eligible for inclusion. For the avoidance of doubt, bonds issued by Financial Institutions which may be converted to equity only on the decision of the Office of the Superintendent of Financial Institutions (OSFI) in the case of a non-viability of the Issuer (so called Non-Viable Contingent Capital) are explicitly included in the index.

[…].”

Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Indices. The amended version of the index guideline will be available on the effective date.