Ann: SandP Indices Announces September Quarterly , page-22

re: Ann: ZSP: SandP Indices Announces Septemb... In case anyone is interested I emailed S&P the following question today. Have a read if you need to sleep;

Qustion:what is the market cap & liquidity required for a company to enter the S&P/ASX 300 Index and also the S&P/ASX 200 Index.

Answer:Hi XXXXX,

Thank you for contacting S&P INDICES Client Services.

Please refer to page 9 in the methodology document for the market capitalization:

Market Capitalization. The S&P/ASX indices only include securities that are considered to be institutionally investable, and market capitalization is a key criterion for stock selection. Stocks are included if they are large enough to meet the minimum ranking requirements for the representative indices within the Australian market.
The market capitalization criterion for stock inclusion is based upon the daily average market capitalization of a security over the last six months. The stock price history (last six months), latest available shares on issue and the Investable Weight Factor (IWF) are the relevant variables for the calculation. The IWF is a variable that is primarily used to determine the available float of a security for ASX listed securities.

The formula for calculating market liquidity can be found on page 11 of our methodology document.

First you calculate the stock median liquidity of every company in the All Ordinaries, you then multiply each stocks median liquidity by their weight based on six month average float adjusted market capitalization. The sum of these values is the market liquidity

We use a relative liquidity hurdle of 50% as a guideline for inclusion into the S&P/ASX 200. Given the pyramid structure of the S&P/ASX Indices, this applies to the S&P/ASX 100 as well as any higher indices.

If you have further questions, please feel free to contact us again.

***Here is page 9 of the methodology document that they sent me;

Securities classified as ?domestic? are eligible for inclusion into all S&P/ASX indices and adhere to the commonly standardized index rules that determine index-eligibility and index-weight. Domestic securities are drawn upon to form the universe for the S&P/ASX All Australian 50 and the S&P/ASX All Australian 200.
The index definition of domestic and foreign-domicile is detailed as:
Domestic. A company is considered to be domestic if:

The company is incorporated in Australia and traded on the ASX; or

The company is incorporated overseas but has an exclusive listing on the ASX; or

The company is incorporated overseas and is traded on other overseas markets, but most of the trading activity occurs on the ASX.
Foreign-Domicile. Generally, a foreign-domicile company is a company that is:

Incorporated overseas; and/or

Listed on one or more overseas markets; and

Has the majority of its trading activity occurring on an overseas exchange.
Eligible Securities. All common and equity preferred stocks (which are not of a fixed income nature) are eligible for inclusion in the indices. Hybrid stocks such as convertible stock, bonds, warrants, and preferred stock that provide a guaranteed fixed return are not eligible. Listed Investment Companies (LICs) that invest in a portfolio of securities are not eligible for index inclusion.
Companies that are currently under consideration for merger or acquisition are not eligible for inclusion or promotion within the S&P/ASX index hierarchy.
Market Capitalization. The S&P/ASX indices only include securities that are considered to be institutionally investable, and market capitalization is a key criterion for stock selection. Stocks are included if they are large enough to meet the minimum ranking requirements for the representative indices within the Australian market.
The market capitalization criterion for stock inclusion is based upon the daily average market capitalization of a security over the last six months. The stock price history (last six months), latest available shares on issue and the Investable Weight Factor (IWF) are the relevant variables for the calculation. The IWF is a variable that is primarily used to determine the available float of a security for ASX listed securities.


***Here is page 11 of the methodolgy document;

Liquidity. Only stocks that are regularly traded are eligible for inclusion in any S&P/ASX index. A stock?s liquidity is measured relative to its peers. Relative Liquidity is calculated as follows:
Liquidity MarketLiquidity MedianStock Liquidity Relative
where:
Stock Median Liquidity is the median daily value traded for each stock divided by the average float/index weight-adjusted market capitalization for the previous six months and;
Market Liquidity is determined using the market capitalisation weighted average of the stock median liquidities of the 500 constituents in the All Ordinaries index.
S&P Indices believes turnover in index membership should be avoided when possible. At times a company may appear to temporarily violate one or more of the addition criteria. However, the addition criteria are for addition to an index, not for continued membership. As a result, an index constituent that appears to violate criteria for addition to that index will not be deleted unless ongoing conditions warrant an index change.
Sector Classification. Stocks are classified by the Global Industry Classification Standard (GICS?). These sectors, consistent throughout all the Standard & Poor?s indices, are Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Telecommunication Services and Utilities. GICS classifies a stock according to a number of measures, including revenues, earnings and the market?s perception of a company.
In addition to the 10 GICS Sectors, S&P also recognizes other industry segments relevant to the Australian market and promotes the following indices:

A-REIT = Real Estate Investment Trusts 404020 (GICS Tier 3)

Resources = Energy 10 (GICS Tier 1) plus Metals & Mining 151040 (GICS Tier 3); and Industrials = All other stocks

Metals & Mining 151040 (GICS Tier 3)

Gold 15104030 (GICS Tier 4)
Timing of Intra-Quarter Constituent Changes
Announcements to Market. Changes to index composition will generally be made two-to-five business days in advance of index implementation of anticipated corporate events whenever practical, bearing in mind that the timing of such events is occasionally uncertain. Announcements will be made outside of trading hours by way of a Press Release, on recognized Australian and international wire services and on the Standard & Poor?s Index Services Web site. Where necessary, a more detailed announcement is