{"id":11487,"date":"2010-07-10T00:55:12","date_gmt":"2010-07-10T04:55:12","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=11487"},"modified":"2010-07-10T00:55:12","modified_gmt":"2010-07-10T04:55:12","slug":"txpr-sp-announces-major-methodological-change","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=11487","title":{"rendered":"TXPR: S&amp;P Announces Major Methodological Change"},"content":{"rendered":"<p>Standard &#038; Poor&#8217;s <a href=\"http:\/\/www.cnw.ca\/en\/releases\/archive\/July2010\/09\/c3371.html\">has announced<\/a>:<\/p>\n<blockquote><p>the following modifications to the methodology of the S&#038;P\/TSX Preferred Share Index, which will become effective after the close of trading on Friday, July 16, 2010, with the second semi-annual review of the index in 2010:<\/p>\n<ul>\n<li>There will be no limit to the number of preferred share issues from any given issuer. Previously, the number of issues per issuer was limited to a maximum of three.\n<li>There will be a maximum relative weight of 10% set per issuer. All eligible lines for an issuer will be included in the index and capped on a pro-rata basis to a maximum of 10% of the total index market capitalization.\n<li>Preferred shares that have a mandatory conversion or a scheduled maturity or redemption within 12 months of the review period will not be added to the index. Existing index constituents which have a redemption or conversion will be removed on the redemption or conversion date.\n<li>A buffer rule for existing index constituents will be applied for the dollar value traded liquidity requirement. Existing constituents must have a minimum average dollar value traded in the 3 months prior to the review date of C$100,000.\n<li>The liquidity requirement to get included in the index will increase from C$100,000 to C$200,000.\n<li>Effective January 2011 the rebalance scheduled will change from semi-annually to quarterly. Rebalancing will occur after the close on the third Friday of January, April, July and October.<\/ul>\n<p>In order to lessen the impact of these changes, the new methodology will be phased in beginning with the July 2010 rebalance. The index will rebalance 25% each month from July to October, effective after the close on the third Friday, where S&#038;P will apply a weight factor to each issue in order to gradually bring each in to the index.<\/p><\/blockquote>\n<p>It will take me a little time to digest the effect of all these changes. Clearly, they are attempting to make life easier for CPD so that mechanical application of trading rules to a change in relatively small issue doesn&#8217;t burn them as badly as <a href=\"http:\/\/www.prefblog.com\/?p=9495\">POW.PR.C, inter alia, burned them last time<\/a>.<\/p>\n<p>I find the liquidity requirement to be fascinating. Assiduous Readers will remember that HIMIPref&trade; has a <a href=\"http:\/\/www.prefblog.com\/?p=5995\">relatively complex methodology<\/a> for determining averageTradingValue. This is because preferred share volumes are lumpy: a few block trades can distort a simple mean average considerably. We may well see some issues added that don&#8217;t really meet a sensible trading criteria.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Standard &#038; Poor&#8217;s has announced: the following modifications to the methodology of the S&#038;P\/TSX Preferred Share Index, which will become effective after the close of trading on Friday, July 16, 2010, with the second semi-annual &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-11487","post","type-post","status-publish","format-standard","hentry","category-indices-and-etfs"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/11487","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11487"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/11487\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}