<Nikkei Index Consultation>
May 11, 2020
Nikkei Inc.

Index Consultation Regarding the Extraordinary Replacement Rules of theNikkei Stock Average
As the most popular measure of the Japanese stock market, the Nikkei Stock Average (Nikkei225) has been widely used not as a barometer of the market but for financial products. Rapid
increase in the assets linked to the index as a background, Nikkei is planning to make changes
to its “Extraordinary Replacement Rules” and consults market participants and users on thesubject matter as follows.
1.

Timing of the constituents change in case of designation as “a security to be delisted”[Constituent Selection Rules 3(3)]Under the current rule, when a constituent is designated as a stock to be delisted unexpectedly,such a stock is deleted from the index on the next day, and an addition is made usually 2 days
after the designation.

Under the new rule, deletion and addition will be made after 5business day of its designation. However, for extraordinary replacement due to other events
such as merger, share transfer, share exchange or transfer to the 2nd section of the Tokyo
Stock Exchange, current rule applies, and the replacement takes place on the day of the eventof deletion.
Current Rule

Proposed new rule

In principle, constituents are changed on theIn principle, constituents are changed on thedayday

when

theevent

constituents takes place.

todelete

theHowever, towhen

theevent

todeletetheconstituents takes place. However, when amake the news of the constituents change constituent is designated as “a security to bewidely known, time may be taken before thedelisted”, such a constituent is removed, andchanges become effective, especially whena new constituent is added after 5 market

the event such as bankruptcy happens

business days of such designation.

suddenly. Also, additions are made after

effective date is announced when the event

some period of time in principle.

takes place

Exact

2.

Response to the constituents designated as “a security under supervision”[Constituent Selection Rules 3(1) Second paragraph]

Currently, a constituent designated as “a security under supervision” becomes a deletion
candidate. Nikkei makes announcement of the fact and usually keeps it as a constituent atthe time of designation. Under the proposed new rule, such constituent remains to be amember of the index.

However, when it is highly likely to be delisted, e.g. successful

completion of TOB to make it a wholly owned subsidiary, such constituent may be replaced
before the stock is designated as “a stock to be delisted”. Nikkei makes pre-announcement
when this rule is applied.
Current Rule

Proposed new rule

The constituents designated as “securities

A constituent designated as “a security

underundersupervision”

becomedeletionsupervision”

remainstobeacandidates. However, decision to delete

constituent at the time of designation.

such candidates will be made by examining

However, Nikkei may replace such a

the sustainability and the probability of

constituent with pre-announcement when it

delisting of the individual case.

is highly inappropriate to keep the stock as aconstituent, e.g. probability of delisting isextremely high.

[Question]
Do you agree to the following proposed changes?
1.

“Timing of the constituents change in case of designation as “a security to be delisted”

2.

“Response to the constituents designated as “a security under supervision”

Please submit your opinion from the form on the following consultation URL.
https://www1.entryform.jp/nikkei_consultation_2020_01e/
Consultation closing date: June 8, 2020
Although your contribution to this consultation is respected, Nikkei makes a decision at its
own discretion. The result of the consultation will be announced as a formal announcementof the new rules.

Your contribution will not be published although a summary without

identity may be used in our documents.
Contact: https://indexes.nikkei.co.jp/nkave/contact