Consultation on MSCI
MarketAxess
USD HY Tradable
Corporate Bond Index
INDEX METHODOLOGY CHANGE PROPOSAL
This consultation may or may not lead to the implementation of any or all of the proposed changes in thehighlighted or any other MSCI indexes. Consultation feedback will remain confidential. MSCI may publicly
disclose feedback if specifically requested by specific market participants. In that case, the relevant feedback
would be published together with the result of the consultation.

September 2023

Information Classification: GENERAL© 2023 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Executive Summary• The MSCI MarketAxess USD HY Tradable Corporate Bond Index is a market value-weighted Index designed to represent theperformance of a selection of relatively liquid fixed income securities from the universe of bonds defined by the MSCI USD HYCorporate Bond Index.
• The index methodology uses the MarketAxess’ Relative Liquidity Scores (“RLS”) to identify and select liquid fixed income securities.
In addition, the index methodology incorporates appropriate buffers in index construction and rebalancing to limit monthly turnover.

• MSCI proposes the following updates to the existing methodology to further improve the overall liquidity and tracking of the index
vs. MSCI USD HY Corporate Bond Index:––––––––

Reduction in monthly average RLS criteria
Introducing a current relative liquidity score cutoff
Reducing the bond size cutoff from $500m to $300m
Removing minimum time-to-maturity at rebalancing
Reducing time to maturity at issuance from 5 years to 3 years
Modification in the priority order of the bond selection algorithm
Increasing the lock-in period from 6 months to 12 months
Introducing capping on active sector and credit rating bucket weights• MSCI welcomes feedback from market participants until September 19, 2023 and will announce the results of the consultation byend of September 2023.

Information Classification: GENERAL

Proposed changes to the MSCI MarketAxess
USD HY Tradable Corporate Bond Index methodology
Current Methodology
Parent index
Liquidity screen

Proposed Methodology Changes• MSCI USD HY Corporate Bond Index• MSCI USD HY Corporate Bond Index• MarketAxess relative liquidity score (RLS)• MarketAxess relative liquidity score (RLS)o Monthly average RLS ≥ 5.5 for new additionso Monthly average RLS ≥ 4.5 for current constituentso Current RLS ≥ 3 for all constituentso Monthly average RLS ≥ 6 for new additionso Monthly average RLS ≥ 5 for current constituents

Size screen• Issuer size ≥ USD 2b• Bond size ≥ USD 500m

• Issuer size ≥ USD 2b• Bond size ≥ USD 300m

Maturity screen• Time-to-maturity at rebalancing ≥ 3Y and Time-to-maturity at issuance ≥ 5Y

• Time-to-maturity at issuance ≥ 3Y. Discontinue time to maturity atrebalancing screen.

• Rank and select top 2 largest bonds within each issuer based on the following criteria(Notional -> Maturity -> Coupon -> Liquidity):
oooo

Security selection

Rank each security within the issuer based on notional amount outstanding
For securities with same notional, the one with longer remaining time-to-maturity is ranked higher
For securities with same time-to-maturity, the one with higher coupon is ranked higher
For securities with same maturity, the one with higher monthly average liquidity is ranked higher• Same bond selection criteria of top 2 largest bonds with modificationin the order of tie breakero Notional -> Liquidity -> Maturity -> Coupon• Current constituents preferred over new additions
Turnoverconsideration• 6 months lock-in period: once added, a bond will remain in the index for a minimum run of 6 months, subject•

to meeting the inclusion criteria of size, maturity and current RLS mentioned above
12 months lock-out period: once deleted a bond cannot re-enter the index for 12 months• 12 months lock-in period• 12 months lock-out period

Security weighting• Market value weighted• Market value weighted

Issuer cap• 3%• 3%Sector cap• None• ±5% w.r.t. parent index

Credit Rating cap• None• ±5% w.r.t. parent index

Rebalancing• Monthly• MonthlyPricing• Refinitiv• Switch to MarketAxess CP+ pricing when the proposed changes would
be implemented (subject to consultation decisions)Index start date

• December 30th, 2016

Information Classification: GENERAL• December 30th, 2016

The proposed changes help bring down the MSCI MarketAxess USD
HY Tradable Corporate Bond index’s duration, more in-line with thatof the parent index and at the same time reduces the sector bias
USD HY Tradable Corporate Bond Index

USD HY Tradable Corporate Bond Index
USD HY
ParentCurrent

Diff

USD HY
ParentCurrent

Diff(Currentvs. Parent)

Proposed

Diff(Proposedvs. Parent)

Communication Services

13.62

17.87

4.25

15.60

1.98

Consumer Discretionary

19.15

15.31

-3.84

16.30

-2.85

Consumer Staples

3.44

3.39

-0.05

3.01

-0.43

Energy

12.01

8.69

-3.32

9.84

-2.17

Financials

8.16

7.43

-0.73

8.82

0.66

Health Care

8.50

13.35

4.85

11.32

2.82

Industrials

14.29

12.97

-1.32

14.05

-0.24

Information Technology

5.26

6.38

1.12

6.56

1.30

Materials

7.94

5.05

-2.89

5.47

-2.47

Real Estate

4.49

4.85

0.36

5.04

0.55

Utilities

3.15

4.72

1.57

3.99

0.84

BB

42.55

45.30

2.75

45.36

2.81

B

45.55

44.63

-0.92

45.67

0.12

CCC

11.35

10.08

-1.27

8.96

-2.39

C

0.51

--0.51--0.51

Diff(Currentvs. Parent)

Proposed(Proposedvs.
Parent)Number of Securities

1,809275

15.20%*

33418.46%*

Number of Issuers

839

171

20.38%*

191

22.77%*

Duration-to-Worst

3.94

4.54

0.60

4.03

0.09

Yield-to-Worst

8.72

8.46-0.26

8.42-0.30

Coupon

5.75

5.48

-0.27

5.58

-0.17

OAS (bps)

438

423-14413-24Time-to-Maturity(years)

5.47

6.36

0.89

5.57

0.10

Average Liquidity Score

6.13

8.22

2.09

8.06

1.93

Index Weights in % (GICS Sector)

Index Weights in % (Credit Rating#)

Minimum LiquidityScore

1213

2.00

Bid-Ask-Spread (bps)2923-622-7

Simulated Impact As of 01 June 2023.
* For Number of Securities and Number of Issuers, the Diff column shows the percentage of the parent index covered by the tradable index.
# Credit Rating is defined as the lower rating from S&P and Moody’s.
Information Classification: GENERAL

Consultation Questions• Do you agree with the addition of absolute liquidity score cutoffs along with average liquidityscore cutoffs?
• Do you agree with the relaxation in size & maturity thresholds to increase representation inthe MSCI MarketAxess USD HY Tradable Corporate Bond Index vs. the MSCI USD HYCorporate Bond Index?
• Do you agree with the increase in lock-in period to reduce index turnover?
• Do you agree with the introduction of active weight capping on sector and credit ratingbuckets?
• Do you agree with the overall methodology change proposal? In your view, what could be thebenefits or drawbacks of the proposed changes?

Information Classification: GENERALAbout MSCIMSCI is a leading provider of critical decision support tools and services for the global
investment community. With over 50 years of expertise in research, data and technology, wepower better investment decisions by enabling clients to understand and analyze key driversof risk and return and confidently build more effective portfolios. We create industry-leading
research-enhanced solutions that clients use to gain insight into and improve transparency
across the investment process. To learn more, please visit www.msci.com.

Information Classification: GENERAL

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About MSCI: Index
MSCI is a leading provider of critical decision support tools and services for the global
investment community. With over 50 years of expertise in research, data and technology, wepower better investment decisions by enabling clients to understand and analyze key driversof risk and return and confidently build more effective portfolios. We create industry-leading
research-enhanced solutions that clients use to gain insight into and improve transparency
across the investment process. To learn more, please visit www.msci.com.
The process for submitting a formal index complaint can be found on the index regulation
page of MSCI’s website at: https://www.msci.com/index-regulation.

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