MSCI and FTSE Russell will remove Russian listings from their indexes next week.

Both index providers began consultations in late February regarding the accessibility of the Russian equities market as sanctions escalate and the Moscow Exchange remains closed.

An “overwhelming majority” of responses confirmed that “the Russian equity market is currently uninvestable,” MSCI said in a statement.

FTSE Russell will delete Russia from all of its equities indexes as of the open on Mon., March 7, and Russia will become an “unclassified” market. MSCI Russia Indexes will be reclassified from “emerging markets” to “standalone markets” status as of market close on Wed., March 9.

ETFs tracking Russian securities may continue to trade existing units, but there can be no redemptions or new units created until sanctions are lifted.

“The speed of global sanctions against Russia has been so forceful that the impacts to index investors have in effect already happened — the market value of the Russian securities has been written down to zero, similar to what would happen to your holdings in a single company if it suddenly went bankrupt,” said Daniel Straus, director of ETF research and strategy with National Bank Financial, in an email to Investment Executive.

“An index investor’s untradeable positions may leave the owners of the security to a claim on some residual value or future equity down the line, but that remains to be resolved,” Straus added.

Since Russia’s market weight is about 3% in emerging market ETFs, Russian listing removals from an underlying index “would manifest as a sudden 3% decline in [net asset value] and price. But because the whole index is so volatile especially now, the sudden zero-ing out of Russian securities is swallowed by the noise from the rest of the portfolio,” Straus said.

However, the largest Russia ETF trading in the U.S., the VanEck Russia ETF (BATS: RSX), tracks the MVIS Russia Index, which has been frozen since March 1. RSX creations and redemptions are suspended.

“This is still a developing situation, but for now RSX appears to be trading at a significant premium to NAV,” Straus said. “Yesterday it closed at $7.19 compared with a NAV of $1.29. The product and others like it might trade as highly speculative ‘closed-end funds’ with uninvestable underlying securities for some time, but its ultimate fate remains an open question.”

In a monthly ETF report, Straus and his colleagues noted that Canadian ETFs had an estimated 1% of total assets ($312 million) exposed to Russian securities at the end of February.

Once the Moscow Exchange reopens and restrictions on non-resident investors lift, FTSE Russell said it will determine at that time whether to re-include Russia in its standard global indexes — it will not happen automatically.

S&P Dow Jones Indices is also consulting stakeholders about whether to remove Russian listings. As a preliminary step, the provider announced Tuesday that it would halt any index adjustments related to Russian listings.

The world’s largest asset manager, BlackRock Inc., said in a statement that it suspended the purchase of all Russian securities in its active and index funds as of Monday. Today, Russian securities account for less than 0.01% of BlackRock client assets.

“We also have proactively advocated with our index providers to remove Russian securities from broad-based indices,” the firm stated.