Standard & Poor’s Index Services Australia And The Australian Stock Exchange: Review Of Index Treatment Of Foreign-Domiciled Companies – Market Update

On May 18, 2006, Standard & Poor’s Index Services Australia (S&P) and the Australian Stock Exchange (ASX) announced the undertaking of a consultation process with interested index stakeholders, focusing on the issue of foreign-domiciled companies and the domestic suite of S&P/ASX indices.

The consultation process, which has now concluded, occurred in response to market feedback that an index structure alternative to the existing one may better meet the changing needs of S&P/ASX index stakeholders in a domestic environment of increasing globalisation. S&P and the ASX wish to thank the large number of index stakeholders who contributed to the consultation process by making well considered and detailed submissions for consideration by the Australian Index Committee.

Following the consultation process, and taking into consideration the broad range of different views from market users, S&P and the ASX confirm the following changes will be implemented.

• The S&P/ASX index treatment of foreign-domiciled companies will be changed. Foreign companies on the ASX will be considered for inclusion within the S&P/ASX indices subject to meeting capitalisation and liquidity hurdles.
• The S&P/ASX 50 index will no longer be included in the S&P Global 1200 index. It will continue as part of the Australian index suite, however.
• S&P will develop a new index that will consist of Australian- and New Zealand-domiciled companies and exclude foreign-domiciled companies specifically for the S&P Global 1200 index.

During the consultation process, a number of unique index-methodology issues were raised that will necessitate changes to the proposed methodology described in the May 18 consultation paper. Therefore, prior to announcing the specific changes, S&P and the ASX will seek additional feedback from the Australian Index Advisory Panel¹ on both the preferred methodology for the S&P/ASX indices and proposed new index of Australian- and New Zealand-domiciled companies.

We anticipate announcing the new index methodology early in 2007 for a June 2007 implementation. This timing will ensure a smooth and orderly transition to the new index arrangements.

¹The Index Advisory Panel is a representative group of industry stakeholders who provide a practitioner’s insight into issues relating to the design and management of the S&P/ASX indices.