S&P/ASX Index Methodology How Australian Indices Are Constructed...

S&P/ASX Index Methodology
How Australian Indices Are Constructed And Maintained
S&P/ASX Index MethodologyHow Australian Indices Are Constructed And Maintained
This document outlines the methodology
framework that guides Standard &
Poor’s in the construction and maintenance
of the S&P/ASX indices.


S&P/ASX 300

The S&P/ASX 300 is comprised of the S&P/
ASX 200 plus up to an additional 100
stocks.





A representative from Standard &
Poor’s is the chairman of the Index
Committee. Meetings are held on a
quarterly basis as well as on an as-
needed basis should unusual corporate
events warrant. The Index Committee
reserves the right to use discretion to
include, exclude, adjust, or postpone
the inclusion of a stock, the shares,
and the Investable Weight Factor
(IWF) of a stock.

ELIGIBILITY

In order to be eligible for inclusion in
any of the S&P/ASX indices stocks
must meet certain criteria:

Listing

Only stocks listed on the Australian
Stock Exchange will be considered for
inclusion in any of the S&P/ASX indices. New listings will only be considered for inclusion once the Standard &
Poor’s Index Committee has had sufficient time to quantitatively analyse the
performance of the stock.

Size

Stocks are assessed based on the average of their previous six-month day-
end free float adjusted market

capitalisation. In times of high volatility the current market capitalisation of
the stock may also be considered.

Liquidity

Only stocks that are actively and regularly traded are considered for inclusion in any S&P/ASX index. A stock’s
liquidity is measured relative to its size
peers. The minimum relative liquidity
for purposes of inclusion will depend
upon the size of the company. Relative
liquidity is calculated as follows:

Relative liquidity = stock median liquidity/market liquidity

Stock median liquidity is the median
daily liquidity for each stock over six
months. Daily liquidity for each stock
is the daily value traded divided by
day-end market capitalisation adjusted
for free float.

Market liquidity is determined using the
weighted average of the stock median
liquidities of the largest 500 domestic
stocks. The six-months average market
capitalisation used as part of the market capitalisation criteria is used for
this purpose.






INDEX DELETIONS &
ADDITIONS



Quarterly Rebalance

Constituents are rebalanced quarterly
to ensure adequate market capitalisation and liquidity. Both market capitalisation and liquidity are assessed
using the previous six months’ worth
of data. Quarterly rebalance changes
take effect on the third Friday of December, March, June, and September.
The S&P/ASX 300, unlike the other
indices, is rebalanced every six
months, with changes taking effect on
the third Friday of March and September.

Intra Quarter

The most common reason for deleting
a stock from an S&P index intra quarter is acquisition by another company.
Additionally, stocks may be deleted for
the following reasons:

Voluntary Administration

A company is removed from the index
immediately after filing for voluntary
administration.

Restructuring

Each company’s restructuring plan is
analysed in depth. The restructured
company and any spin-offs are reviewed for index inclusion or exclusion.






ANNOUNCEMENT OF
INDEX CHANGES

Quarterly rebalance announcements
are made approximately 10 business
days prior to the changes taking effect.

Intra quarter changes are announced
approximately five days prior to the
implementation of anticipated corporate events whenever practical, bearing
in mind that the timing of such events
is occasionally uncertain.

Announcements for removals and replacements of companies are made via
a press release to the ASX Company
Announcements Platform (CAP),
where Standard & Poor’s Index Services has its own company code: ZSP.