Process for Extraordinary Index Rebalances in connection with China Connect Stock Listings | Effective Date: 27 March 2020
On 24 January 2020, Solactive AG published a “Market Consultation on the Solactive Post Ex- Market Consultation on Process Definition of China Connect Listings” (https://www.solactive.com/market-consultation-on-process-definition-of-china-connect-listings-january-17-2019/). The consultation paper aimed to collect comments on proposed changes related to standardized treatments to face potential issues of China A-shares inclusion in the background of the China Connect Stock Program.
The consultation period ended on 21 February 2020. Respondents expressed a clear preference for the proposed extraordinary rebalancing mechanism if the minimum members constraint of an index is breached due to removals of stocks from the list of instruments eligible under the China Connect Stock Program. The also proposed “Blocked List” for stocks which have been removed from the list of instruments eligible under the China Connect Stock Program was not supported. Accordingly, this proposal was not implemented. The final methodology was incorporated into the Equity Index Methodology as a new Section 2.3 “Extraordinary Index Rebalances in Connection with China Connect Stock Listings”. The updated Equity Index Methodology applicable as of the effective date 27 March 2020 is available on the Solactive website: https://www.solactive.com/documents/equity-index-methodology/.
The Extraordinary Index Rebalances in Connection with China Connect Stock Listings will be applied for all existing indices listed in the document (“PROCESS DEFINITION OF CHINA CONNECT LISTINGS | RELATED INDICES”) below (the “Affected Indices”) and new indices that meet the requirements specified in Section 2.3.1 of the Equity Index Methodology.
For clarification: Even if the index guidelines of the Affected Indices do not contain an explicit reference to Section 2.3 of the Equity Index Methodology this section is deemed to be included by reference in the respective index guidelines and is applicable with regard to the extraordinary rebalancing mechanism if the minimum members constraint of an index is breached due to removals of stocks from the list of instruments eligible under the China Connect Stock Program.