Market Consultation

Market Consultation on theTreatment of SuspendedConstituents in the FTSE China A
Index Series

ftserussell.com

October 2015Market Consultation on the Treatment ofSuspended Constituents in the FTSE China A
Index Series
Introduction
The shares of Chinese companies can be suspended pending certain
corporate events such as mergers, new share issues or restructurings. The
proportion of stocks suspended for these reasons is much higher than is
typically found in other markets - the percentage of companies in the FTSE
China A 600 index which are currently suspended is c. 11% - and thesuspensions can be for several months and occasionally longer than a year.

FTSE’s suspended stock policy, as set out in Section 2.15 of the FTSE
Corporate Action Guide(http://www.ftse.com/products/downloads/FTSE_Corporate_Actions_and_Ev
ents_Guide.pdf), was recently invoked to effect the removal of a constituentof the FTSE China A Index Series which includes the FTSE China A50Index. The company in question, China Yangtze Power (A), was aconstituent of the FTSE China A50 Index and its shares had beensuspended for 60 trading days. On 16 September 2015 FTSE announced
the removal of these shares from the A50 index at zero value on theeffective date of the forthcoming A50 index review(http://www.ftse.com/products/index-notices/home/getnotice/?id=1359210).

Subsequent to this event, FTSE would like to consult users of the index on
how such extended suspensions should be treated in the FTSE China A
Index Series in future. Accordingly we invite interested parties to respond tothe consultation questions below.

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Background Information
1. Name of Organisation

2. Please describe your interest in the FTSE China A Index Series(including the FTSE China A50 index)
a. ETF issuer
b. Swap counterpartyc.

Futures trader

d. Passive investor
e. Active investorf.

Other (please describe)

3. Please state the approximate value, or notional value, of yourinterest in the FTSE China A Index Seriesa. Less than $500M USD
b. Between $500M and $1bn USDc.

Between $1bn and $5bn USD

d. Over $5bn USD

4. What is your contractual arrangement with FTSE
a. Data licenceb. Fund licencec.

Product licence (listed or OTC)

d. Other (please describe)e. None5. Where do you normally obtain information on forthcoming changes
to the FTSE China A Index Series?
a. From FTSE data files
b. From FTSE Technical Noticesc.

From other sources (please state which)

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Index Treatment
6. Which of the following potential index treatments would you prefer
for constituents that have been suspended for significant periods,
but which are not considered valueless (i.e. the company is notthought likely to enter bankruptcy proceedings)?
a. The constituent should be deleted at zero valueb. The constituent should be deleted at fair valuec.

The constituent should be deleted at last traded priced. The constituent should be retained in the index

7. If you consider that the constituent should be retained in the index,
what value should be assigned to it?
a. Last traded priceb. Fair valuec.

Zero valued. Some other value (please state what)8.

If you consider the constituent should be deleted, either at zero, at
fair value or last traded price, when should the decision be taken
assuming the company has not provided a firm date for theresumption of trading?
a. After 40 trading days of continuous suspension
b. After 60 trading days of continuous suspensionc.

After 80 trading days of continuous suspension

d. After 100 or more trading days of continuous suspension (pleasestate when)

9. If a decision is taken to delete the constituent, what minimum notice
should FTSE give before making the deletion effective (assume thedecision would be rescinded if trading were to recommence or afirm date for the resumption of trading were to be provided)?
a.

10 trading daysb.

20 trading daysc.

40 trading daysd.

Some other time (please state when)

FTSE Russell | Market Consultation

410. If a decision is taken to delete the constituent, should the deletionbe made effective at the next index review (subject to the minimum
notice period from Question 9)?
a. Yesb. No

11. If you consider the constituent should be deleted at fair value, orretained in the index at fair value, how should that value bedetermined?
a. By adjusting the last traded price by the subsequent market returnb. By adjusting the last traded price by the subsequent sector returnc.

By market consultationd. Other (please state how)

12. If a constituent is deleted and then subsequently resumes trading,should the constituent be re-instated?
a. Yes, if the resumption is within 20 trading days of deletionb. Yes, if the resumption is within 60 trading days of deletionc.

Yes, if the resumption is within 120 trading days of deletiond. Yes, but some other time period (please state)e. No

13. If a deleted constituent is re-instated in the index, what should theinclusion price be?
a. The deletion priceb. Some other price (please say which)

14. If a deleted constituent is re-instated in the index, what should its
future treatment be if, as in the A50 index, the required number ofconstituents is exceeded?
a. The re-instated constituent should be deleted with notice, e.g. T+5?
b. The index should continue with an extra constituent until the nextreview

Other Considerations
15. Please provide any additional comments you wish to make.

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Responding to the consultation
Please provide answers to this consultation online athttps://www.surveymonkey.com/r/5BTZX2S
The consultation will close on 23 October 2015. All responses will be treated as confidential.

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