(August 17 – 11:55 ET) – Standard & Poor’s is rewriting the rules for including stocks in its Canadian market indices.
Under the revised rules, exchangeable shares and multiple class shares will no longer be allowed. Effective immediately, exchangeable shares will not be eligible for inclusion in the TSE 300 Composite Index. Those issues currently in the index will be removed at the next quarterly rebalancing, scheduled for December 15. The biggest name to go is JDS Uniphase. Replacement companies will be announced in the first week of December.
Similarly only one class of shares for each company will be eligible for inclusion in the TSE 300. All other classes of shares will be combined into the largest most liquid class at S&P’s discretion. If a company currently has two classes of shares in the index, one will be removed and combined into the other. This change will take effect at the same time as the TSE 300 annual revision in March 2001.
These changes are being made because S&P believes companies are being included in indexes that are not representative of the index’s intent. The effect of multi-class shares is that large cap companies can be included in small- and mid-cap indexes, while exchangeable shares allow non-Canadian companies to be included in Canadian indexes. The S&P/TSE Canadian Index Policy Committee says these changes come in the wake of an ongoing consultation process with the Canadian financial marketplace.
S&P also announced that the TSE 300 Mid-Quarter Update will take place on a calendar quarterly basis to correspond with the expiry of the S&P/TSE 60 Futures contracts. “The purpose of this change is to reduce index turnover for investors using the S&P/TSE 60 Futures contracts by having the expiry of the contract coincide with the changes in the index.” The TSE 300 annual revision will be announced in the first week of March, based on February month-end data, and completed on the expiry date of the March S&P/TSE 60 futures contracts.
-IE Staff