Moscow Exchange introduces new index calculation methodology

On 10 November 2017 the Central Bank of the Russian Federation registered a revised methodology for the calculation of Moscow Exchange’s indices. The new methodology increases liquidity requirements for component stocks and allows for a variable number of stocks to be included in the indices.

The changes are aimed at increasing interest in Moscow Exchange’s indices amongst all types of investors as well as making the indices more representative of the performance of the equity market.

Key changes to the index calculation methodology include:

• The MICEX Index has been renamed the MOEX Russia Index.
• The number of component stocks in the MOEX Russia Index will no longer remain fixed and will be reviewed on a quarterly basis based on the each stock’s liquidity factor, defined as the ratio of the annual trading volume to the market capitalization adjusted for free float. The liquidity factor will be the first-level criteria for inclusion in the index. A minimum liquidity factor of 15% will be required for inclusion and stocks whose liquidity factors fall below 10% will be excluded. Stocks included in the index must be traded daily.
• For index inclusion the free float, or percentage of shares available for trading, will be increased from 5% to 10%. As at present, stocks whose free float falls below 5% will be excluded.
• Component stocks will now be required to account for a minimum weight in the index. Stocks must have a weight of 0.25% or more to be eligible for inclusion. Stocks with a weight of less than 0.2% will be excluded.

All the aforementioned changes will be applied to both the MOEX Russia Index and the RTS Index, which have identical calculation methodology with the sole distinction being that the MOEX Russia Index is calculated in RUB and the RTS Index is calculated in USD.

At present, the number of component stocks for both indices is fixed at 50. Were the new methodology to come into force today, 45 stocks would be included.

The first review under the new methodology will take place on 22 December 2017.

Additional details on the new index calculation methodology and the changes in weightings is available here.