The transition will be implemented over a period of 18 months. In September 2004 Standard & Poor's will publish procedures and float adjustment factors, and begin calculation of provisional float-adjusted indices. In March 2005 the official index series for the U.S. indices will shift to partial float adjustment, using float adjustment factors that represent half of the total adjustment; in September 2005 the shift to float adjustment will be completed, the official index series will be fully float-adjusted and the provisional series will be discontinued. Float adjustment factors will be reviewed annually in September. Throughout the transition period there will always be one, and only one, official variant of the S&P 500 and each other Standard & Poor's index.
David M. Blitzer, Managing Director and Chairman of the Index Committee, explained that this change reflects extensive discussions with investors and index users: "Over the last few years providing float-adjusted indices, where the share counts of stocks in the index are adjusted to eliminate strategic blocks of stock and cross holdings, has become increasingly important to investors and index users. Last fall, Standard & Poor's discussed this issue with its U.S. Index Advisory Panel and with others and found strong support for this change." Asked about the possible impact on index users, Mr. Blitzer commented, "Preliminary analyses suggest that the turnover should be comparable to typical annual turnover in the indices. Further, we have always considered liquidity and investability in qualifying stocks for the indices, and are providing an extensive transition period. Therefore, the market should take these changes in stride with little difficulty."
