Overview
Announcements

Methodology Change | Several Solactive Indices | 13th August 2018

Solactive announces the following changes to the methodology of the Solactive Health and Fitness Index, Solactive Long Term Care Index and Solactive Obesity Index (hereinafter referred to as the “Indices”).

The Indices are referenced by ETFs listed at US stock exchanges which are implementing the SEC’s new continued listing standards for ETFs. As such, it is Solactive’s intention as administrator to ensure the Indices’ compliance with the material requirements of these standards to enable its continued replicability by the relevant financial instrument(s).

The weighting scheme of the Indices shall be modified to account for the continued listing standards for ETFs. As such the relevant section of the guideline of each Index will be amended and the new wording will be as follows:

“ 1.5 Weighting

On each Adjustment Day each Issuer of the Index is weighted by Free-Float Market Capitalization, adjusted for weight restrictions (weight capping). The procedure is outlined below:

  1. The initial weights are calculated as Free-Float Market Capitalization of Issuer i relative to the Free-Float Market Capitalization of all Issuers in the index.
  2. If the initial weight of any Issuer exceeds 20%, then this weight will be capped at 20%. The excess weight will be redistributed proportionally among all Issuers with a weight of less than 20%. Repeat this step iteratively until the weight of no Issuer exceeds 20%.
  3. The maximum aggregate weight of top 5 Issuers must not exceed 49.5%. If this criterion is breached, the weights of the top 5 Issuers will be proportionally capped at 49.5% and the excess weight is redistributed to other non-capped Issuers.
  4. The remaining Issuers will be capped at the weight of the lower of
    a) 4.5% and
    b) the lowest weight of the top 5 Issuers.

The excess weight will be redistributed proportionally among the non-capped Issuers.

  1. The maximum weight of any Issuer in the Index is restricted to 10% of its market capitalization, assuming a $1B notional index amount. Any excess weight that results from this restriction will be redistributed proportionally among all Issuers with a weight of less than the capped weight of step 4. Repeat this step iteratively.
  2. After applying step 1 to 5 and the sum of the weights does not add up to 100%, criterium 5 may be relaxed. The remaining weight will be redistributed proportionally to the constituents not capped at step 4 or step 5.

Note: if an Issuer has two eligible components within the Index, they will be treated together in calculated the Issuer weight for purposes of employing capping procedures.

1.5.1 Continuous Listing Standard Review

On each Selection Day the index composition will be reviewed for a breach of the following criteria (Continuous Listing Standards):

The maximum weight of the top index constituent must not be larger than 25%

  • If this criterion is breached, the stock is capped at 22% and the excess weight is redistributed to other non-capped stocks.

The maximum aggregate weight of top 5 index constituents must not exceed 60%

  • If this criterion is breached, the stocks will be proportionally capped at 55% and the excess weight is redistributed to other non-capped stocks.

The maximum weight of constituents with a market liquidity below 250,000 shares traded (monthly average of the previous 6 months) and USD 25m monthly average daily traded value (monthly average of the previous 6 months) must not exceed 30%

  • If this criterion is breached, the stocks with a market liquidity below 250,000 shares traded (monthly average of the previous 6 months) and USD 25m monthly average daily traded value (monthly average of the previous 6 months) will be proportionally capped at 25% and the excess weight is redistributed to other non-capped stocks.

The maximum weight of constituents with a full-market capitalization below USD 100m must not account for more than 10%

  • If this criterion is breached, stocks with market capitalization below 100m will be proportionally capped at 9% and the excess weight is redistributed to other non- capped stocks.

This reweighting process will be repeated until no Continuous Listing Standards are breached.

In the event that the CLS criteria cannot be satisfied using the buffers described above, the weighting will be reviewed by the Index Committee. After the review a decision will be announced publicly.”

As previously announced the above-mentioned changes were subject to a market consultation. After due consideration of the relevant feedback, Solactive has decided to implement the changes.

The new index guidelines will be available as from 14 August 2018.

For more details on the index composition and the adjustment rules applicable to an index, please refer to the respective index detail page on this website.