Market Consultation on the Methodology Change of the Solactive MLP Infrastructure Index
Frankfurt, 1 August 2018 – Solactive has decided to conduct a Market Consultation with regard to several proposals to change the methodology of the Solactive MLP Infrastructure Index (hereinafter referred to as the “Indes”). All stakeholders and interested third parties are invited to provide input and feedback to the proposed changes. Solactive welcomes all contributions and thoroughly assesses all responses received.
While Solactive’s Oversight Committee considers that the integrity and continued comparability of the indices is not infringed, it has identified certain proposed changes as material within the meaning of Solactive’s Methodology Policy and has therefore decided to conduct this Market Consultation.
If you would like to share your thoughts with Solactive, please use the consultation form below and provide us with your personal details and those of your organization.
a) The weighting scheme of the Index shall be modified to take account of the fact that the current weighting scheme does not cover the situation of less members in the Index than 18. The relevant section of the guideline of the Index shall be amended accordingly and the new wording will be as follows:
The Index seeks to maintain a minimum of 20 constituents at each quarterly rebalance. However, if there are fewer than 20 companies that meet the eligibility criteria described in section 2.1, the Index may contain fewer than 20 constituents.
Therefore, the weighting scheme of the Index is determined based on the number of selected constituents in the Index at each quarterly rebalance.
On each Adjustment Day each Index Component of the Solactive MLP Infrastructure Index is ranked and weighted proportionally according to its Free Float Market Capitalization.
In case there are at least 18 Index Constituents selected, the Percentage Weight of the Index Component with the highest Free Float Market Capitalization (rank number 1) is capped at 10%, the Index Component with rank number 2 is capped at 9%. This mechanism proceeds until the Index Component with rank number 6 is capped at 5% and all Index Components with a rank number above 6 are capped at 4,75%. The excess weight is allocated proportionally to all Index Components whose Percentage Weight is not capped.
In case there are less than 18 Index Constituents selected, the weighting scheme is based on the number of constituents as detailed in the table below:
The calculated Number of Shares as of the Selection Day are used and will be implemented as of the close on the Adjustment Day. To match the correct index level on the Adjustment Day, the Number of Shares will be multiplied with a constant Correction Factor, i.e. the Number of Shares will be up scaled or down scaled.
The Number of Shares as of the Selection Date are adjusted for any relevant corporate actions between Selection Day and
Adjustment Day. This only relates to corporate actions that have a direct impact on the price and shares (i.e. stock splits, stock dividends, rights issues).
For clarification: The calculation of the weighting is based on the close market data as of the Selection Day.
The capping methodology may be amended by the Committee from time to time to ensure appropriate index representation and index compliance with financial product regulations in the United States.”
b) If there are less than 20 companies which fulfil the selection criteria in section 4, the minimum Free Float Market Capitalization criteria shall be relaxed as set out below. Furthermore, companies which are not currently components of the Index but has announced a merger agreement will not be considered eligible for the Index; and the minimum number of Index Components shall be reduced to 13. Section 2.1 of the guideline of the Index shall be amended accordingly and the new wording will be as follows:
“2.1 Selection of the Index Components
The initial composition of the Index as well as any ongoing adjustment is based on the following rules:
On the Selection Days, Solactive AG provides the Selection Pool.
All infrastructure MLPs which fulfil the index criteria as outlined in chapter 4 will be added to the index. If a company, which is not a current Index Component, has publicly announced a merger agreement to be acquired as of the Selection Day, it will not be considered eligible for the Selection Pool.
The required number of Index Components is 20 and the maximum number of Index Components is 30. If there are less than 20 companies that fulfil the criteria outlined in chapter 4, the minimum Free Float Market Capitalization is relaxed up to 1.000 million USD until the required number of 20 Index Components is reached If there are less than 20 companies eligible, the Index will contain less than 20 index constituents. The minimum number of Index Components is 13.
If there are more than 30 companies that fulfil the criteria defined in section 4 the 30 companies with the highest rank are chosen.
The companies in the Selection Pool are ranked according to their Free Float Market Capitalization. The company with the largest Free Float Market Capitalization is assigned rank number 1, the company with the second-largest Free Float Market Capitalization rank number 2 etc. The companies with the highest ranks are then chosen as Index Components and the new index composition determined this way is valid starting immediately following the Adjustment Day. For clarification, rank number 1 is higher than rank number 2.”
c) The selection criteria shall be modified as follows. Only companies which are listed on a regulated stock exchange in the United States shall be eligible to be included in the Index. The definition of “Selection Pool” in section 4 (Definitions) of the guideline of the Index shall be amended and the new wording shall be as follows:
“Selection Pool” in respect of a Selection Day are those companies that fulfill the following conditions:
- Listed on a regulated stock exchange in the United States
- Structured as Master Limited Partnership
- Business focus on owning and operating assets used in energy logistics, including, but not limited to, pipelines, storage facilities and other assets used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil or refined products.
- Free Float Market Capitalization of at least 2,000 million USD
- Average daily trading volume in the last three months of at least 2,500,000 USD
- Maintained or grown its distribution quarter-over-quarter for at least one of the trailing two quarters
- General Partners (GPs) are not eligible for inclusion.
d) Taking into account the change under c) above, the definition of a “Business Day” in section 4 (Definitions) of the guideline of the Index will be amended and the new wording will be as follows:
A “Business Day” is a day on which the New York Stock Exchange is open for trading.