FTSE Ground Rule Changes – Secondary Lines
In accordance with existing rules, a secondary line will be deleted at an index review where its market capitalisation has fallen below 20% of the principal line. In order to allow secondary lines to remain in the index where its market capitalisation has fallen below 20% of the principal line but is large enough to qualify as an index constituent in its own right, the FTSE Policy Group has approved the following rule changes:
FTSE UK Index Series Rule 4.4
Previous rule:
Only the eligible quoted equity capital of a constituent company will be included in the calculation of its market capitalisation. Where a company has two or more classes of equity, significant and liquid secondary lines will be included in the calculation of the market capitalisation of the company, based on the market price of the secondary line. Unless the FTSE Europe/Middle East/Africa Regional Committee deems it inappropriate, a secondary line will be priced separately if its full market capitalisation, i.e. before the application of any investability weightings, is greater than 25% of the full market capitalisation, of the company’s main line and the secondary line is eligible, in its own right, under Rules 4.3 to 4.10. Secondary lines which are less than 25% of the company’s main line will be excluded. Should the full market capitalisation of a secondary line, which is already a constituent of the Index, fall below 20% of the company’s main line at the quarterly review, the secondary line will be deleted from the index.
New rule:
Only the eligible quoted equity capital of a constituent company will be included in the calculation of its market capitalisation. Where a company has two or more classes of equity, significant and liquid secondary lines will be included in the calculation of the market capitalisation of the company, based on the market price of that secondary line. Unless the FTSE Europe /Middle East / Africa Regional committee deems it inappropriate, a secondary line will be included if its full market capitalisation, i.e. before the application of any investability weightings, is greater than 25% of the full market capitalisation of the company’s principal line and the secondary line is eligible, in its own right, under Rules 4.3 to 4.10. Should the full market capitalisation of a secondary line, which is already a constituent of the FTSE All-Share Index or the FTSE Fledgling Index, fall below 20% of the full market capitalisation of the company’s principal line at an annual review, the secondary line will be deleted from the relevant index unless its full market capitalisation remains above the qualification level for continued inclusion as a constituent of the FTSE All-Share Index at that review.
FTSE Global Equity Index Series Rule 6.7.2
Previous rule:
Where there are multiple lines of equity capital in a company, all are included and priced separately, provided that:
• The line passes all screens (see Ground Rules 6.3– 6.6).
• The secondary line’s full market value (i.e. before the application of any investability weightings) is greater than 25% of the full market capital of the company’s main line. Should the market value of a secondary line that is already a constituent of the Index Series fall below 20% at the next review, the secondary line is deleted from the index.
• All partly-paid classes of equity are priced on a fully-paid basis if the calls are payable at known future dates. Those recognised as being "permanently partly-paid" are priced on a partly-paid basis.
New rule:
Where there are multiple lines of equity capital in a company, all are included and priced separately, provided that:
• The secondary line’s full market capitalisation (i.e. before the application of any investability weightings) is greater than 25% of the full market capitalisation of the company’s principal line and the secondary line is eligible in its own right in all respects under Ground Rule 6. Should the full market capitalisation of a secondary line that is already a constituent of the FTSE All-World Index or the FTSE Global Small Cap Index fall below 20% of the full market capitalisation of the company’s principal line at an annual review, the secondary line will be deleted from the FTSE All-World Index or the FTSE Global Small Cap Index unless its full market capitalisation remains above the qualification level for continued inclusion as a constituent in the relevant regional index at that review.
• All partly-paid classes of equity are priced on a fully-paid basis if the calls are fixed and are payable at known future dates. Those where future calls are uncertain in either respect are priced on a partly-paid basis.
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