One-off Methodology Change | Solactive Canadian Fixed Income Select Indices | Change of selection criteria for May 2020 Rebalance

On the 14^th May 2020, Solactive announces the following one-off changes to the methodology of the following Indices (the ‘Affected Indices’):

Rationale for methodology change

In light of the continued coronavirus crisis and its effect in the Canadian market conditions, in particular the liquidity constraints, impaired tradability and higher transaction costs, Solactive has decided to change the selection criteria in the selection process for the May 2020 rebalance of the Affected Indices. Moreover, this one-off  change leads for definite proposed changes in selection criteria outlined in the market consultation for Solactive Canadian Select Indices.

The one-off change is necessary to maintain the base objective of the index, which is the replication of the performance of the Canadian bond market denominated in CAD. With this extraordinary market environment, our current methodology fails to reflect these unique circumstances. 

One-off Changes to the Index Guideline

1) The words “or third rank” will be added in the following sentence of the section 2.1.1. “Solactive Canadian Select Corporate Bond Index” of the Guideline:

Old version:

2.1.1 Solactive Canadian Select Corporate Bond Index:

[..] Assuming a bond had the highest rank in the last selection and only has the second rank in the current selection, it will be chosen as an index component. Respectively the bond with the first rank will not be included in such a case.

New version:

2.1.1 Solactive Canadian Select Corporate Bond Index:

 [..] Assuming a bond had the highest rank in the last selection and only has the second or third rank in the current selection, it will be chosen as an index component. Respectively the bond with the first rank will not be included in such a case.

2) The words “two positions” will substitute the words “one position” in the following sentence of the section 2.1.2. “Solactive Canadian Select Universe Bond Index” of the Guideline:

Old version:

2.1.2. Solactive Canadian Select Universe Bond Index:

[..] If a bond was ranked first in the last selection it will continue to be an index component as long as it’s rank is not reduced by more than one position [..] 

New version:

2.1.2. Solactive Canadian Select Universe Bond Index:

[..] If a bond was ranked first in the last selection it will continue to be an index component as long as it’s rank is not reduced by more than two positions[..]

For the avoidance of doubt: Bonds that are selected for inclusion in the Affected Indices have to meet the rest of the selection criteria as specified in the respective index guideline of the Affected Indices.

Solactive would like to point out that the above change of the selection criteria is a one-off and extraordinary measure to react to the current unexpected and extreme market conditions. No precautionary effect for measures to be taken in future comparable situations can be derived from this.