Overview

Result of Market Consultation | Treatment of Bond Indices in Response to Recent Sanctions Targeting Russia | 4th March 2022

On 2 March 2022, Solactive AG published a Market Consultation on the Treatment of bond indices in response to recent sanctions targeting Russia.  The Market Consultation aimed to collect feedback on the impact of the recently announced sanctions on the operations of the Russian bond market, and in particular the ability of investors to trade in these bond instruments and the market in general, and the replicability of Solactive administered indices which contain Russian bond securities (the “Affected Indices”).  The consultation period ended on 3 March 2022.  Solactive AG received a large number of valuable responses and conducted a comprehensive review of the feedback received.

Feedback of the participants in the Market Consultation was overwhelmingly in favour of the proposals made therein, and Solactive AG has decided to implement the changes detailed below.  

The Effective Date of the changes will be at the open of 10 March 2022.

Ineligibility of Russian bond market

Russia will be classified as no longer meeting the requirements for Emerging Market Countries in accordance with the Bond Market Classification Framework and remove it from the respective lists of both Hard Currency and Local Currency Emerging Bond Markets. A consequence of this reclassification is that Russian bond securities will no longer be eligible for inclusion in Solactive administered indices.  This will apply to bonds where the country of incorporation or country of risk of the issuer is Russia.

The updated Bond Market Classification Framework can be found here (https://www.solactive.com/documents/bond-market-classification-framework/) following the Effective Date.

For those Affected Indices which explicitly refer to Russian bond eligibility in the Index Guidelines, these will be considered in the same manner as above, and this index specific eligibility will be removed.

Removal of Russian bond securities which are existing components of Solactive administered indices

As a result of the observed impact of the sanctions on the Russian bond markets and the limitations on accessibility and tradability for investors, Solactive AG will remove any Russian bond securities from any Affected Indices.  This will be implemented following the close of business on 9 March 2022, being effective at the open on 10 March 2022   The Affected Indices will not be rebalanced, but the Russian bond securities will be removed at a price of zero.    This will apply to bonds where the country of incorporation or country of risk of the issuer is Russia.

 

For other indices, where Solactive AG is only the calculation agent and not acting as index administrator under the European Benchmarks Regulation (BMR), the index owner is asked to contact Solactive AG with instructions on the treatment for their indices.