Index Consultation AEX Index Family Market of Reference Rule 

Introduction

Euronext would like to consult a proposed change to chapter 5.2.1 of the AEX Family rulebook.
The proposed changes will be applied to the index as of the next annual review of the AEX Family in March 2021.
Stakeholders are invited to indicate if they agree with the proposed change before 1st of July 2020.

Background

Unique for Euronext, the national indices are dealing with a situation in which more than one listing refers to the same order book. Only one of these listings can be the Market of Reference, which also determines the national index family to which the company is allocated in first instance. There are a few companies that historically were strongly connected to more markets and as such also included in more than 1 national family, typically after a merger.
Since the introduction of a Single Orderbook, spanning multiple listing venues, it has become impossible to use the market volume as an indicator of to which market(s) a company should be allocated. That is why a rule was introduced allowing companies listed on Euronext Amsterdam without having Euronext Amsterdam as the Market of Reference to enter the AEX family based on criteria around head-office, business assets and staff numbers.
These criteria are hard to asses and can lead to unpredictable results of the review. Moreover, other Euronext Index Families, the CAC family and the BEL Family, have already restricted the additional inclusions to only merger results and already existing cases (‘grandfathering’) that continue to meet the specific nationality criteria.

Go to  Proposed Rule Change | Current Rule | Proposed New Rule | Questions 

Proposed Rule Change

The Proposal of the Administrator of the AEX index family is to change the rule such that inclusion of companies with a Market of Reference other than Euronext Amsterdam will be restricted to current cases and newly formed companies resulting from a merger. Like the situation at present, constituents of the AEX family remain included in the universe as long as they fulfill the criteria defined for current constituents: 20% of assets or 20% of head office or 10% of FTE.
Companies with a Market of Reference other than Euronext Amsterdam that are included in the Index family as a result of a merger involving a current constituent will be regarded as current constituents. Mergers in this respect are business combinations whereby the transaction is an exchange of shares.
Furthermore, the clause on communicating in private in case of no longer fulfilling the criteria is removed. In the wake of the Benchmark regulation this practice has not been applied since 2019. Moreover, the AEX Steering Committee decided to remove the explicit discretionary power to maintain constituents that would not fulfill the criteria.

Current rule

5.2.1 Index universe

The universe of the index is defined as companies that have been admitted to listing on Euronext Amsterdam. Eligible companies are:

  1. Companies with Euronext Amsterdam as Market of Reference (as defined in the Euronext harmonised rule book); and
  2. Companies with a Market of Reference other than Euronext Amsterdam that may enter  based on the presence of
    • business assets in the Netherlands representing at least 33% of total consolidated balance sheet, or
    • head-office activities in the Netherlands representing at least 33% of total consolidated balance sheet or turnover, or
    • employment numbers of staff in the Netherlands representing at least 15% of the consolidated group;

These criteria may be relaxed if the case is supported by:

    • Related derivative instruments on the Amsterdam market ranking  among the top 30 in terms of open interest; or
    • History of inclusion in indices (for recognizable parts of the company).
  1. Current constituent companies with a Market of Reference other than Euronext Amsterdam, that  may continue to be included at each annual review based on a check in accordance with the following procedure:
    1. Business assets, head-office activities and numbers of staff in the Netherlands will have to meet the following minimum percentages: 20%, 20% and 10% respectively (regarding at least one of the criteria as defined under II.);
    2. If the data lead to the conclusion that a company no longer meets the minimum criteria, this will be communicated (privately) with the company before 31 January of any year. The company will have a possibility to react on the analysis and to provide additional facts that might be relevant within two weeks.

The Supervisor will decide on the eligibility based on the analysis of Index Design, the additional facts provided by the company and trading data regarding related derivative instruments. Moreover the Supervisor has the discretionary power to maintain a constituent in spite of not fulfilling the criteria if, to the judgment of the Supervisor, this is in the interest of the participants of the capital market in Amsterdam.
The decisions regarding eligibility will be published on the Review Announcement Date .

Proposed new rule

5.2.1 Index universe

The universe of the index is defined as companies that have been admitted to listing on Euronext Amsterdam. Eligible companies are:
I. Companies with Euronext Amsterdam as Market of Reference (as defined in the Euronext harmonised rule book); and
II. Current constituents with a Market of Reference other than Euronext Amsterdam, that may continue to be included at each annual review based on the following criteria:

  • Business assets as percentage of total balance sheet of at least 20%, and/or,
  • head-office activities representing at least 20% and/or
  • numbers of staff in the Netherlands at least 10% of FTE.

The Independent Supervisor will decide on the eligibility based on the analysis of Index Design.
The decisions regarding eligibility will be published on the Review Announcement Date.


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