The changes are motivated by feedback from both domestic market players and that of international clients who’s trading volumes and market share on Borsa Italiana’s IDEM derivatives platform are on constant rise since the replacement of the MIB30 by the S&P/MIB. Whilst the S&P/MIB will remain responsive to changes in the underlying market, it has been susceptible to more frequent but small changes affecting the overall structure of the index, and hence higher intra-quarter turnover. This new index policy is expected to make the S&P/MIB more cost-efficient to track, replicate and hedge.
The new methodology comes into effect immediately so as to reduce potential impact upon the next expiration of S&P/MIB futures & options in September, which trade on Borsa Italiana.
The technical specifications and practical applications are as follows:
Index Rebalancing – IWF Changes
Investible weight factors (IWFs) will be reviewed on a quarterly basis (rather than half-yearly) and will be effective using the opening prices on Monday morning, following the third Friday of March, June, September and December, (to coincide with the expiry of derivatives of IDEM contracts).
Intra Quarter Share & IWF Change
- Share changes will be implemented if there is a change greater than 10%
Corporate actions (for example, merger and capital increase) resulting in a change to the shares outstanding of greater than 10% will be reflected in the index at the end of the corporate action period.
When the share change is a result of what can be described as a “market wide event”, S&P may decide to implement changes greater than 5%.
All other changes to shares outstanding will occur at the quarterly share update.
- IWF changes will be implemented if there is a change greater than 10%
When the IWF change is a result of what can be described as a “market wide event” such as an institutional placement, selldown via a bookbuild or partial takeover offer, S&P may decide to implement changes in IWF that are less than 10% but greater than 5%.
All other IWF changes will occur at the quarterly IWF update.
Announcement changes
Announcement regarding share and IWF’s intra quarter changes where possible will be made at the close of the BIt Market on Tuesdays to be effective after the close of trading on Fridays, or at the open of trading on Mondays.
When there are a number of impending changes in shares & IWF’s, every effort will be made to ensure the timing of the changes will be coordinated so as to minimize the number of small adjustments to the Index Divisor and hence the Futures Basket.
In cases of a consolidation of outstanding shares and/or IWF changes, S&P will keep the market duly informed about the timing of the operation by the way of a news release.
Index Revisions
Rather than just being reviewed annually in March, the S&P/MIB Index Committee is free to assess if the number of constituents is representative of the market at each quarterly review. Any changes to the number of constituents in the S&P/MIB Index will only be made after providing the market ample notice period.
