BMV - Mexican Stock Exchange will adjust its index to free float market capitalization on November 3rd, 2009

BMV - Mexican Stock Exchange will adjust its index to free float market capitalization on November 3rd, 2009

01/10/09

The significance of market indices has increased over time as they have been used as reference for the design of financial securities, mostly ETFs. Thus, for a market index to serve as a market reference today, it needs to meet the following two criteria:

1. Be representative
Constituents should reflect the behaviour of he market where they are listed.

2. Be investable The liquidity and depth of the constituents should be such that they respond to the liquidity requirements of the market participants In order to ensure that the BMV’s index keeps these characteristics, the Exchange through its Index Methodology Committee, conducted an in-depth analysis of the characteristics of the Mexican market, of its listed securities and the international trends and best practices in terms of index methodologies.

It is worth mentioning that the new rules are consistent with the goals of the market and its participants; by promoting liquidity they increase the Index’s invest-ability and trading in its securities.

As a result of the above-mentioned analysis and with its commitment to the Mexican market, BMV has determined: b) For eligibility and rebalancing criteria only for the IPC:

  • The next annual rebalancing of the index will be carried out in February 2010, under the current rules.
  • In September 2010 the index will be rebalanced according to a new Liquidity Factor (instead of the Marketability Index currently used). This new factor will better reflect the trading activity and liquidity conditions of the constituent.
  • The Stock Exchange will announce new eligibility rules in January 2010.
  • As of 2011 the rebalancing of the index will be done every year in September.

c) Regarding weighting methodology.

BMV will adjust its index for free float (FF) since it reflects the actual available shares. Shares held by control groups, founding families, or strategic investors such as governments will be deemed as non-available shares.

Click here for the details on constituents and methodology and schedules