Rule Change for MVWARP

1.2.1 Market Capitalization and Liquidity Criteria

Old

All of the following applies for securities already in the index:

• free-float of at least 5%

New

All of the following applies for securities already in the index:

• free-float of at least 5% (2% for companies with a full market capitalization exceeding 50.00 billion USD)

1.2.2 Initial Public Offerings, Special Purpose Acquisition Companies, and Spin-Offs

Old

In addition, the below special periodical cases are also considered for IPO/spin-offs (not considering SPACs):

• In case an IPO/Spin-off takes place between the close of the last business day of February, May, August, and November and the close of the second Wednesday of March, June, September, and December, respectively: If this IPO/Spin-off exceeds a full market capitalization of USD 5bn on closing date of the IPO effective date, and it ranks within the top 17 of free-float market capitalization of the eligible universe, it will be added to the index on the review implementation date with a weighting according to the index weighting scheme following the definitions under 2.3.
• In case an IPO/Spin-off takes place after the close of the second Wednesday until the third Friday of March, June, September, and December: If this IPO/Spin-off exceeds a full market capitalization of USD 5bn on the third Friday of March, June, September, and December following the IPO effective date/if the third Friday is the IPO effective date, it will be added after close of the Friday of the following week with a maximum weight of 5% based on the market data as of the Friday following the third Friday of March, June, September, and December/if the third Friday is the IPO effective date.
• For all other time periods: If the IPO/Spin-off exceeds a full market capitalization of USD 5bn on the Friday following the IPO effective date/if the Friday is the IPO effective date, it will be added after close of the Friday of the following week with a maximum weight of 5% based on the market data as of the Friday following the IPO effective date/if the Friday is the IPO effective date.

For these special periodical IPO/Spin-off cases, the following applies:

• The IPO must have a free-float factor of at least 10%, and
• Due to lack of historical data, no liquidity rule is applied.

New

In addition, the below special periodical cases are also considered for IPO/spin-offs (not considering SPACs):

• In case an IPO/Spin-off takes place between the close of the last business day of February, May, August, and November and the close of the second Wednesday of March, June, September, and December, respectively: If this IPO/Spin-off exceeds a full market capitalization of USD 5bn on closing date of the IPO effective date, and it ranks within the top 17 of free-float market capitalization of the eligible universe, it will be added to the index on the review implementation date with a weighting according to the index weighting scheme following the definitions under 2.3.
• In case an IPO/Spin-off takes place after the close of the second Wednesday until the third Friday of March, June, September, and December: If this IPO/Spin-off exceeds a full market capitalization of USD 5bn on the third Friday of March, June, September, and December following the IPO effective date/if the third Friday is the IPO effective date, it will be added after close of the Friday of the following week with a maximum weight of 20% based on the market data as of the Friday following the third Friday of March, June, September, and December/if the third Friday is the IPO effective date.
• For all other time periods: If the IPO/Spin-off exceeds a full market capitalization of USD 5bn on the Friday following the IPO effective date/if the Friday is the IPO effective date, it will be added after close of the Friday of the following week with a maximum weight of 20% based on the market data as of the Friday following the IPO effective date/if the Friday is the IPO effective date.

For these special periodical IPO/Spin-off cases, the following applies:

• The IPO/Spin-off must have a free-float factor of at least 5% (2% for companies with a full market capitalization exceeding 100.00 billion USD), and
• Due to lack of historical data, no liquidity rule is applied.

2.3 Weighting Scheme

Old

Upon an index rebalance, components selected to the index will be weighted according to a modified float-adjusted market cap weighting strategy as follows:

• The maximum security weight is the lesser of:

  – 8% or

– the security’s three-month average daily trading volume in USD divided by 250.00 million.

• Components are weighted in proportion to their free-float adjusted market capitalization.
• If a security’s weight exceeds the maximum weight, the weight will be reduced to the maximum weight and the excess weight shall be redistributed among uncapped components equally.
• This process is repeated until the sum of all components’ weights is equal to 100% and no security’s weight exceeds the maximum security weight.

The nominal value used in the liquidity overlay may be adjusted downward to allow the aggregate weight of all index components to equal to 100% while satisfying all other capping scheme constraints.

If the aggregate weight of components with a weight greater than or equal to 5% exceeds 50% the following procedure is implemented:

• The weight of the smallest component, by float-adjusted market capitalization, with a weight of 5% or more and all other components with a weight between than 4.5% and 5%, will be reduced to 4.5%.
• The remaining weight will be redistributed among all remaining components with a weight less than 4.5%, such that the aggregate tier weights do not change, on a pro-rata basis.
• This procedure is repeated until the aggregate weight of components with a weight of 5% or more is less than or equal to 50%.

New

Upon an index rebalance, components selected to the index will be weighted according to a modified float-adjusted market cap weighting strategy:

1. All index components are weighted by their free-float market capitalization.
2. The top 5 components by free-float market capitalization are grouped together (so called “Large-Weights”). All other components are grouped together as well (so called “Small-Weights”).
3. The aggregated weighting of the Large-Weights is capped at 50%:

• Large-Weights: If the aggregated weighting of all components in Large-Weight exceeds 50%, then a capping factor is calculated to bring the weighting down to 50% - at the same time a second capping factor for the Small-Weights is calculated to increase the aggregated weight to 50%. These two factors are then applied to all components in the Large-Weights or the Small-Weights respectively.
• Large-Weights: The maximum weight for any single security shall be the lesser of (i) 20% and (ii) the security’s three-month average daily trading volume in USD divided by 250.00 million USD. The minimum weight for any single security shall be 5%.

 In the event that the application of the maximum weight constraint and the minimum weight constraint produce conflicting results for a given security, the minimum weight shall take precedence over the maximum weight. If a security is above the maximum or below the minimum weight, then the weight will be reduced to the maximum weight or increased to the minimum weight and the excess weight shall be redistributed proportionally across all other remaining index constituents in the Large-Weights.

• Small-Weights: The maximum weight for any single security shall be the lesser of (i) 4.5% and (ii) the security’s three-month average daily trading volume in USD divided by 250.00 million USD. If a security is above the maximum weight, then the weight will be reduced to the maximum weight and the excess weight shall be redistributed proportionally across all other remaining index constituents in the Small-Weights.

The nominal value used in the liquidity overlay may be adjusted downward to allow the aggregate weight of all index components to equal to 100% while satisfying all other capping scheme constraints.