The Baltic stock exchanges will adopt the NOREX rules “Rules for the construction and maintenance of the NOREX Exchanges' All-share, Sector and Benchmark Indices”. The rules are available at http://www.norex.com and on the websites of Baltic stock exchanges at http://files.ee.omxgroup.com/bors/press/Baltic_indices_062005_eng.pdf
In connection with the adoption to the NOREX rules some rule changes will be made regarding RIGSE, TALSE, VILSE and BALTIX. Below is the list of the major changes:
- Reinvestments of dividends
In the current formula the dividend adjustment is made by adding the dividend amount to the price of the dividend-paying share in the numerator. In the new formula the dividend amount is subtracted from the share price in the denominator. In practice the change means that the adjustment in the new model takes place in the opening index basket on the dividend ex-date whereas in the current model the dividend is adjusted only after the first trade is made with the dividend-paying share. In the current model the adjustment for some illiquid shares can take place several days or even weeks after the ex-dividend date. The new model makes the dividend adjustment whether there were trades or not.
- Introduction of the NOREX price algorithm
To represent the price of a share in the index formula, the following rules will be applied:
- If an officially registered trading price for an index stock has not been quoted on the relevant trading day, the last quoted trading price shall be used in the calculation.
- If a bid has been quoted that is higher than the last quoted trading price, the bid shall be applied in the calculation.
- If an offer has been quoted that is lower than the last quoted trading price, the offer shall be applied in the calculation.
- If either the closing bid or offer is used as the closing value, this price will be viewed as the last traded price in the calculation of the index on the following day, until a new official trade price is registered.
The purpose of the NOREX Price Algorithm is to attain a price for index calculation, which is more precise for illiquid shares than the price of the last trade.
The calculation of BALTIX remains to be based on the official last quoted trading price for the security or the price at the close of the Index on the previous day.
- Merger / take-over
In case of merger or takeover the share in question will be excluded from the index effective on the day the acquiring company controls at least 90% of the outstanding shares in the acquired company.
The term “control” is here defined as when either, (a) the acquiring company notifies the Exchanges of their control or receiving accepts of at least 90 per cent, (b) the transaction is registered in the Exchanges trading system or (c) the shares are registered with the CSDs.
For the calculation of BALTIX - if a company’s shares are at least 90 per cent owned by one owner, the shares are to be excluded from the index calculation during the next quarterly review, if the Baltic Exchanges do not decide otherwise.
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Valuation method for spin-offs
In addition to the currently used exclusion rule a new “valuation method” will be introduced for spin-off adjustments. The aim is to attain a value for the spun-off share or right so that exclusion can be avoided on the ex-date. The value of the share/right can be calculated with the following three methods:
- When the share/right is listed on another exchange.
- When the company informs the public about the value.
- The median value of valuations from members (minimum 5 valuations).
If none of the above-mentioned methods is applicable the Exchanges have the possibility to exclude the share/right for the ex-date or until an appropriate price are available.
