FTSE Canada Fixed Income
Minimum Issue Size Thresholds
Consultation Results and Index Changes
August 2018
FTSE Russell has concluded its Minimum Issue Size Thresholds market consultation
which considered how issue size and amount outstanding thresholds should be applied in
the construction and maintenance of the FTSE Canada Universe Bond Index, the FTSE
Canada Maple Bond Index, and the FTSE Canada High Yield Bond Index. The
consultation can be viewed here.
The consultation considered the following topics:

Minimum issue size thresholds in the Universe, Maple, and High Yield indexes
given contemporary issuance patterns and coverage;
Differentiated minimum issue size thresholds at the Government and Corporate
sub-index level, with potential further differentiation within the Government sector
for Federal, Provincial and Municipal bonds;
Whether minimum issue size thresholds should be applied to determine eligibility
at issuance only, or applied throughout the life of a bond to trigger deletion ofholdings.

The feedback received as part of this consultation has been considered under the FTSE
governance framework. This includes input from the FTSE Canada External Advisory
Committee with the final decision being taken at the FTSE Product Governance Board.
Following the completion of that process, we are pleased to announce the followingchanges:Effective January 1, 2019, the minimum issue size threshold for
Government sector bonds in the Universe Bond Index will be raised to$100MM, from its current minimum of $50MM. The minimum issue size thresholdfor Corporate sector bonds will remain unchanged at $100MM. Minimum
thresholds across all securities in FTSE Canada Universe, Maple, and High Yield
Indexes will be aligned as a result of this change;

Existing index constituents will be grandfathered and bonds issued (and settled)
between now and December 31, 2018 will continue to be eligible for inclusion
under current minimum issue size thresholds. There will be no impact tocurrent constituents as a result of this change;

Minimum issue size thresholds will continue to apply to determine index
eligibility at entry only. Securities with amount outstanding adjustment for
stripping, reconstitution, amortization, and / or corporate action will remain
eligible for the indexes. The determination of market value weights andcontribution to return in the indexes continues to be based on adjusted amountoutstanding.

The remainder of this document provides further details on the feedback gathered byFTSE Russell as part of the minimum issue size consultation and the rationale for theresulting changes.
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Market Consultation Approach
FTSE Russell regularly consults the market for input on index methodologies. Any
proposals for amendments to existing rules follow a robust protocol and are subject toconsultation with external advisory committees and, for significant changes, with thebroad market. The FTSE Russell Product Governance Board has ultimate decisionmaking authority. Any resulting changes are clearly and broadly communicated to themarket.
Gathering and Analyzing Market Feedback
The Minimum Issue Size market consultation was conducted through an on-line survey
platform and ran for a period of approximately 3 months. The broad market wasencouraged to provide feedback. Fully completed responses from 54 respondent firms
across a broad and comprehensive range of market participants were obtained. Inaddition to answering the formal survey questions, participants were able to provide
comments which were also taken into consideration by FTSE Russell.
Survey Results Summary
The consultation feedback did not provide a strong mandate to support significant
revisions to minimum issue size thresholds other than the changes announced here. The
key highlights from the responses are summarized below:








The majority of respondents supported an increase to the current Government
bond issue size threshold of $50MM. The feedback received indicated there wasbroad support for sector-specific thresholds to be applied as appropriate forGovernment and Corporate bonds., The possibility of introducing additional
differentiation between Federal, Provincial and Municipal sectors was noted. The
majority of respondents favoured a $100MM minimum threshold for Provincial
and Municipal sectors.
Feedback on whether the minimum issue size for the Corporate sector should beraised was fairly evenly split. Those in favour of an increase indicated apreference for a threshold between $150 to $200MM. However, there was noconsensus or overall strong mandate to warrant a change.
In respect of the Maple Index, most respondents indicated that differentiation of
the issue size rules between Government and Corporate sector thresholds wasless relevant. Views on the appropriateness of the current threshold of $100MM
were fairly evenly split between the status quo and an increase to $200MM.
In respect of the High Yield Index, the majority of respondents supported thecurrent minimum issue size threshold of $100MM as being representative of themarket.
In considering the application of minimum issue size thresholds throughout thelife of the security versus at issuance only, responses were split. There was aslightly higher preference for continued inclusion of securities if they fell below anamount outstanding threshold. There was a general consensus among
respondents that existing constituents should be grandfathered, and stripping or
amortization should not be considered as a trigger for removal.

In light of this market feedback, and in consideration of the potential movement of
securities between the various index families (for example the potential for bonds to be
downgraded or upgraded and to move between the Universe and the High Yield BondIndexes), the minimum issue size threshold for Government sector bonds in indexes will
be raised to $100MM. This aligns the minimum thresholds across all securities in theFTSE Canada Universe, Maple, and High Yield indexes. The changes apply on a go
forward basis only and there will be no other impact to the treatment of constituents.
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FTSE Russell recognizes the need to maintain transparency and stability in its indexes,
as well as the need to give due consideration to the requirement to provide sufficient
notice to stakeholders of any change. We are therefore providing the market with a four(4) month notice period to allow for any necessary adjustments to be made to issuanceprograms. The effective implementation date of these changes is January 1, 2019.
The existing index constituents will be grandfathered and bonds issued (and settled
between now and December 31, 2018 will continue to be eligible for inclusion under thecurrent minimum issue size thresholds.
Several respondents also provided comments which generally related to considerationsof broad market representativeness, issuer access, and the impact on existing investors;
the respondents noted that these requirements needed to be balanced withconsiderations of investability and the potential effect on new investors. FTSE Russell is
considering these points as part of its policy of continually reviewing its existing index
methodologies and its global product offering.

Please contact us at ftsebond@ftserussell.com or 416.572.7979 with any questions orcomments.

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