| Tue 7 Feb 2023, 17:30 | | Informative Notice – 20230207 Index Harmonisation Consultation Feedback Informative Notice |
|
Informative Notice – 20230207 Index Harmonisation Consultation Feedback Informative Notice
Index Harmonisation Consultation Feedback – Informative Notice
7 February 2023
In September 2022, a market consultation was published to solicit feedback on the FTSE/JSE Africa Index
Series harmonisation proposal detailed therein.
The consultation closed on 31 October 2022, and on 05 December 2022, an Informative Notice was
published to relay that the feedback, indicative timelines, and proposals provided in the consultation
document were under review. FTSE Russell and the JSE would like to thank respondents for submitting
their valuable and constructive feedback.
Latest developments and consultation summary
The consultation responses and feedback were also discussed at the December 2022 FTSE/JSE (equity)
Index Series Advisory Committee (AC) meeting. It was noted that for phase one, which consists of a
methodology change to the SWIX methodology for the ‘vanilla’ indices, a large majority of the respondents
were in favour of and understood the rationale for the harmonisation. This was largely due to the fact that
the indices naturally converge as a result of the decrease in grandfathered companies. FTSE Russell and
the JSE will communicate the implementation date for the phase once changes in due course, and confirm
that the methodology change for the vanilla indices will not be implemented in June 2023, but at a later
review.
With regard to the shift to a multi-cap environment at 10% and 15%, FTSE/JSE received varied responses.
It was clear from the feedback that both the ‘status quo’ and the proposed enhancements present issues,
which remain unresolved for many index users. Responses from the domestic index user segment regarding
the concept of a default benchmark included a preference for shifting to 10%, a preference to remain at
12%, and varying degrees of ambivalence. In line with the decision not to implement the SWIX weighting
methodology change for the vanilla indices in June 2023, in addition, FTSE Russell and the JSE will not
implement a change to the existing 12% capping level in June 2023 (although new supporting indices with
different capping levels may be considered before then). FTSE Russell and the JSE have committed to
providing a six-month notice period for significant weighting changes which related to the index
harmonisation project.
The final phase of the project is the termination of all SWIX based indices. A number of respondents,
particularly in the OTC markets and those with long-dated positions, expressed the view that the proposed
timeline of March 2024 did not provide sufficient notice. Feedback was also received regarding the
administrative process determining switching benchmarks and the costs associated thereof. As such, this
phase will not occur in March 2024. The next steps will be for FTSE Russell and the JSE to continue to
engage with market participants and schedule a further discussion at the March 2023 Advisory Committee
meeting, with feedback to be provided to the market shortly thereafter.
Other noteworthy feedback was on the Depositary Receipts (DR) adjustments proposal. The DR data are
used as an input into the SWIX calculation. However, there have been challenges with obtaining this data
due to the Protection of Personal Information (POPI) Act. Many respondents understood the challenge, and
the index impact of excluding the DR data was forwarded to the respondents who requested this
information. Confirmation is hereby provided that the DR adjustment will take place as communicated and
will be implemented at the March 2023 SWIX review.
Next steps and implementation proposals
Due for - SWIX weighting methodology change: no change at the June 2023 review,
imminent including the application of capping.
implementation o New indices with alternative capping levels could be launched before
June 2023.
o If methodology changes are made in the future, the notice period will
be six months.
- Depositary receipt adjustments: implementation will occur at the March 2023
SWIX Index Review.
For future - Methodology change for the ‘vanilla’ indices: next steps and timeline to be
consideration announced in due course
and
implementation - Termination of SWIX indices: will not occur before March 2024; further updates to
follow after further discussions with the FTSE/JSE Index Series Advisory
Committee.
Index users are reminded that all methodology updates are subject to review and approval by the FTSE
Russell Index Governance Board and will be considered in line with FTSE Russell’s Policy for Benchmark
Methodology Changes.
For further information please contact FTSE Russell Client Services at info@ftserussell.com or call:
Australia +1800 653 680
Hong Kong +852 2164 3333
Japan +81 3 4563 6346
London +44 (0) 20 7866 1810
New York +1866 551 0617
Alternatively please visit our website at www.ftserussell.com
Terms of Use | Copyright © 2023 FTSE Russell
Date: 07-02-2023 05:30:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
