Ahead of the September 2020 index roll, IHS Markit is undertaking a review of the iTraxx Australia index rules. IHS Markit invites feedback on the two proposals outlined below for changes to the iTraxx Australia index rules.
We request market participants to kindly provide your feedback by
Wednesday, 29th July, following which we will review further and outline future course of action. To provide feedback or for any queries, please email
itraxxadvisory@ihsmarkit.com.
Current Index Rules are published under Documentation, iTraxx Product Rules on the following page:
https://www.markit.com/Documentation/Product/ITraxx
PROPOSED RULE CHANGES For an entity to be eligible for inclusion in the iTraxx Australia index, it must be a member of either the Liquidity List or the Additional Entity List. IHS Markit is proposing the following rule changes to the eligibility criteria of the two lists:
1. Liquidity List
Currently, in order for entities to be eligible for the Liquidity List, among other criteria, entities:
a. must have traded in the last eight weeks preceding the roll month as per the DTCC Roll Report;
b. must have a minimum of AUD 150,000,000 publicly traded debt outstanding in a currency that is deliverable into an Australian CDS contract.
IHS Markit is considering dropping rule (a.) above to increase the pool of liquid CDS names to be eligible for index inclusion. Further, IHS Markit is considering amending rule (b.) above to require entities to have a minimum of AUD 150,000,000 publicly traded
Senior debt outstanding in a currency that is deliverable into an Australian CDS contract.
As per the March 2020 DTCC Roll Report, the below additional names would become eligible for index inclusion via the Liquidity List, as long as they satisfy all other criteria for the Liquidity List:
| AMCOR PTY LTD | GPT RE LIMITED | TELSTRA CORPORATION LIMITED |
| CROWN RESORTS LIMITED | SCENTRE MANAGEMENT LIMITED |
2. Additional Entity List
As per the current rules, when there are not enough names eligible for the index in the Liquidity List, new names are included in the index via the Additional Entity List. The Additional Entity List consists of the largest Australia/NZ debt issuers as per iBoxx AUD/EUR/GBP/USD indices that are not part of the Liquidity List. One of the criteria for names to be part of the Additional Entity List is that they must have minimum debt outstanding equivalent to AUD 750 million. IHS Markit is proposing an amendment to this criterion to only consider Senior debt when determining the debt outstanding for names to be included in the Additional Entity List.
As per the July 2020 composition of the iBoxx indices used to construct the Additional Entity List, the following names will potentially be eligible for index inclusion:
| AUSTRALIA PACIFIC AIRPORTS MELBOURNE PTY LTD | GOODMAN AUSTRALIA INDUSTRIAL PARTNERSHIP | PACIFIC NATIONAL HOLDINGS PTY LTD | VICINITY CENTRES |
| BRISBANE AIRPORT CORP PTY LTD | GOODMAN GROUP | SANTOS LTD | WESTLINK MOTORWAY GROUP |
| CHORUS LTD | LONSDALE FINANCE HOLD PTY LTD | SINGTEL OPTUS PTY LTD | |
| FONTERRA CO-OPERATIVE GROUP LTD | NATIONAL HOUSING FINANCE AND INVESTMENT CORP | UNITED ENERGY DISTRIBUTION PTY LTD | |
Please note that the names in both proposals have been provided for INDICATIVE purposes only. The iTraxx Australia Series 34 selection will be based on September 2020 DTCC Roll Report and September 2020 iBoxx indices composition.