Overview
Market Consultation

Market Consultation on the Methodology Change of Solactive MLP & Energy Infrastructure

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 & Energy 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. The relevant section of the guideline of the Index shall be amended accordingly and the new wording will be as follows:

“1.5. Weighting

 

On each Adjustment Day, the MLP allocation within the Solactive MLP & Energy Infrastructure Index is weighted according to Free Float Market Capitalization.

The Percentage Weight of any MLP component is capped at 4.5% on the Adjustment Days. The excess weight is allocated proportionally to all MLP Components whose Percentage Weight is not capped. 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. All MLPs as a group receive an aggregated weight of 24% as of the quarterly Selection Day.

All non MLP companies are weighted according to Free Float Market Capitalization. The three index components with the largest Free Float Market Capitalization are assigned a fixed weight of 9%. The company with the fourth largest Free Float Market Capitalization receives a fixed weight of 8% and the fifth largest company in terms of Free Float Market Capitalization is assigned a fixed weight of 7%. The sixth largest company in terms of Free Float Market Capitalization receives 6.5%. All other non MLP components are capped at 4.5%. All non MLP companies as a group receive a weight of 76% as of the quarterly Selection Day.

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.”

 

b) Companies which are not currently components of the Index but has announced a merger agreement will not be considered eligible for the Index. Furthermore, the following current sentence in section 2.1 of the guideline of the Index shall be deleted: “In case two affiliate companies are eligible for index inclusion, the index owner may decide to exclude the corresponding MLP in order to increase issuer diversification”.

Section 2.1 of the guideline of the Index shall be amended 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, their affiliate companies and all Energy Infrastructure Companies, 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 minimum number of Index Components is 20. There have to be at least 13 companies in the index which are not registered as an MLP as of the selection day in order to comply with index diversification rules. The index Committee may decide to temporarily reduce the minimum criteria as displayed in chapter 4 in order to reach the minimum number of index components.”

c) The selection criteria shall be modified as follows. Also, companies which are structured as an Energy Infrastructure Company shall be eligible for inclusion in the Index. The definition of “Selection Pool” in section 4 (Definitions) of the guideline of the Index shall be amended accordingly and the new wording shall be as follows:

“Selection Pool” in respect of a Selection Day are those companies that fulfil the following conditions:

 

  • Listing on a regulated stock exchange in the United States

 

  • Structured as Master Limited Partnership, an affiliate corporation of an MLP company or an Energy Infrastructure Company

 

  • 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.

 

 

  • Market Capitalization of at least 1,000 million USD for non MLP companies which are not Index Components on the respective Selection Day, at least 750 million USD for non MLP companies which are Index Components on the respective Selection Day

 

  • Market Capitalization of at least 2,000 million USD for MLPs, which are not Index Components on the respective Selection Day, at least 1,500 million USD for MLPs, which are Index Components on the respective Selection Day

 

  • Average daily trading volume in the last three months of at least 1,000,000 USD for companies which are not Index Components on the respective Selection Day, at least 750,000 USD for companies which are Index Components on the respective Selection Day

 

  • Average monthly trading volume of at least 75,000 shares in each of the last six months (“Liquidity Criterion”)”

 

d) Taking into consideration that only companies which are listed on a regulated stock exchange in the United States are eligible to be included in the Index, 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.”