CHANGES IN INDEX METHODOLOGY EFFECTIVE 24 MARCH 2014
Amsterdam, 29 August 2013:Today NYSE Euronext announced that the selection basis of the AEX-Index®family will change from turnover to free float adjusted market capitalization ranking. This decision was made to improve stability in the selection process and to maintain a good reflection of the listings on the Amsterdam stock exchange. Several additional selection criteria will be introduced, aiming to improve tradability and market efficiency of the index, which will also strengthen the objective selection process. These changes, which resulted from a recent client consultation, will be implemented with the next annual index rebalance in March 2014 and will apply to the AEX®, the AMX® and the AScX®. The change in selection basis is not expected to lead to a completely different outcome of the selection process.
One of the likely benefits of this measure is a more stable index composition. Moreover this change aims to have a more timely adaptation of the composition as the information basis will be taken at one specific point in time (shortly before the review) instead of being based on a turnover figure build up over the period of a year. Finally this rule change will bring the index family more in line with international standards.
The AEX-Index family has been based on selection of turnover for a long time. This has put a lot of emphasis on liquidity as the basis for derivative instruments and other traded products. However, in the current market structure, liquidity is of such quality that it is no longer the prime selection tool; it only needs to be screened in the form of a relative liquidity test. Therefore the index universe will be screened using the volume in comparison to free float adjusted number of shares.
Overview methodology changes:
The selection will be based on free float market capitalization.
New screening rules
In order to improve index tradability and efficiency, several screening rules are introduced or improved:
- Relative turnover measurement (velocity) will be based on free float shares
- Trading currency is required to be Euro
- Minimum average closing price of € 1,00 (and € 0,50 for companies already included)
- Minimum free float of 15%.
Variable number of constituents for the AScX
The AScX index will be allowed to consist of less than 25 constituents in case less than 25 companies qualify for inclusion.
Liquidity screening: velocity threshold change
The minimum 10% velocity screening will be replaced by a minimum of 25% free float velocity. The free float velocity connects regulated trading volume to the total number of listed shares available for trading (free float shares).
The current rule changes will be effective as from the 2014 March review (annual review).
December review 2013 – special approach
The December 2013 review will prelude on the changes that will be implemented in the March 2014 review. This means for instance that:
- Any addition will also have to fulfill the requirements under the new rules (free float velocity, trading currency, minimum price)
- In case of vacancies, the selection of constituents will be based on free float market capitalization ranking.
The index Compiler is taking this approach as to have a smooth changeover, avoiding unnecessary changes due to inclusions that may last for only a quarter.
Full details of this rule change are explained in the index announcement.