Apr 03 2020
    Treatment of Dividend Cancellations in Equity Indices

    Due to the economic impact of the COVID-19 epidemic, a number of companies are cancelling previously announced and upcoming dividend payments. In particular, regulatory authorities in various jurisdictions are recommending that banks and insurers cancel discretionary dividend distributions.

    IHS Markit will not, in most instances, restate indices as a result of these cancellations. In the event that a cancellation is announced during the ex-dividend period (e.g. after the ex-dividend date but before the dividend pay date), IHS Markit will apply an equal but negative dividend in the index calculation for the respective company as soon as feasible after the cancellation announcement. This treatment allows the index calculations to most accurately reflect the information available to shareholders at any given time.

    Dividends that have been announced and subsequently cancelled prior to the ex-dividend date will not be applied to the indices. IHS Markit will make every effort to ensure that publicly available information about dividend cancellations is received and processed in a timely fashion. If, however, a dividend is cancelled prior to the ex-dividend date but the information about the cancellation is not available to IHS Markit prior to the ex-dividend date, IHS Markit will apply its established restatement policy on a case-by-case basis to determine if a restatement is warranted.

    Please note that this will be IHS Markit’s standard treatment of dividend cancellations. This will apply to all equity indices calculated and administered by IHS Markit unless the specific index rules specify a custom or bespoke approach.

    For more information please contact us at indices@ihsmarkit.com.

    Mar 16 2020
    Important information about index publication delays and index rebalancing

    IHS Markit continues to monitor current conditions of extreme market volatility to ensure the accuracy and robustness of our indices. With this in mind, please be notified of the following:

    1. Potential index publication delays

    IHS Markit continues to review the depth and quality of inbound pricing data used in the calculation and publication of our indices. We have implemented additional checks, which might result in publication delays. Where publication delays occur or are likely to occur, we will inform end users in advance via our standard communication channels.

    2. Potential index rebalance delays

    IHS Markit is considering the impact of index composition changes (rebalance or roll) on index end users in the current, stressed market environment. In doing so, IHS Markit will take into account overall market impact and index users’ ability to source liquidity for the underlying instruments. IHS Markit will assess parameters for each asset class separately and will seek market feedback as appropriate. Unless stated otherwise, IHS Markit currently operates under the assumption of scheduled index composition changes proceeding as normal. However, please be advised that we continue to review and this is subject to change.

    We kindly advise our index users to monitor our Index News & Information page for latest updates.

    Mar 16 2020
    EMIX LIquid Universe Threshold Adjustment

    Constituents in the IHS Markit EMIX indices are chosen from a liquid universe as described in the “Ground Rules” documents. Using the EMIX “Liquid Universe” as the basis for forming the indices ensures broad representation of global equity markets and adequate liquidity of the individual constituents.

    As financial markets evolve, some of the stated rules for determining the liquid universe no longer reflect the realities of the markets. In particular, the thresholds used to include or exclude securities from the liquid universe are no longer compatible. Steps four and five of the process to determine the liquid universe state:

    1. Locate the turnover ratio which represents the threshold above which 99.95% of the total market capitalisation falls. (Typically, this is around 0.015% to 0.020% turnover per day.) This is the Minimum Threshold.
    2. Remove constituents from the Liquid Universe where [the] daily turnover ratio is below the Minimum Threshold.

    The two thresholds defined in the above rules are no longer compatible and do not achieve the aim of ensuring adequate liquidity and broad representation in the indices. Securities around the 99.95th percentile of overall market capitalisation usually have a median daily turnover significantly smaller than 0.015%. In December 2019, for example, the median daily turnover observed for securities at the 99.95th percentile of total market capitalisation was around 0.0000009%.

    To preserve the objective of ensuring representation and liquidity in the EMIX indices, the threshold for total market capitalisation will be set at the 97.5th percentile of total market capitalisation starting with the upcoming March 2020 rebalancing. This adjusted threshold achieves a median daily turnover more in line with the one stated and intended in the Ground Rules documents.

    The overall index turnover (measured by market capitalization) resulting from this change varies by index family but is in line with turnover experienced in previous rebalancing periods. While a greater number of securities will be removed from the indices than what has been observed in recent rebalances, these securities generally have a small market capitalisation and/ or are illiquid.

    For more information, please contact us at indices@ihsmarkit.com.