1 Purpose
In the course of a continuous index determination, circumstances, generally not within the control of the Administrator, can occur that require a material change of the methodology or a cessation of a Factor Index. Such circumstances may include, among others, significant changes to tradability, lack of access to necessary data, and regulatory, statutory or tax changes. Additionally, a low usage or demand may result in the Administrator’s proposal to terminate an index.
2 Scope
This document describes the procedures applied by Commerzbank AG (the “Administrator”) for indices used as underlying for the issuance of factor certificates, ETNs or ETCs (the “Factor Indices”) by Commerzbank AG, when either changing their methodology or ceasing to offer them.
3 Change Procedure
3.1 Initiation
A change of the index methodology can be triggered (i) as a result of an ordinary internal review of the Factor Index methodology, (ii) on the recommendation of the body which carries out governance and oversight in respect of Benchmarks within Commerzbank AG (the ‘Index Committee’) or (iii) by stakeholders or users of a Factor Index discovering any issues.
3.2 Investigation
As soon as the change procedure is triggered, the Index Committee shall consider if the proposed change (i) is beneficial to the quality and robustness of the Factor Index and (ii) causes a material change of the Factor Index methodology.
A material change constitutes any fundamental change of the calculation method or any change to input data or the underlying itself.
3.3 Implementation
In the case of a non-material change that is beneficial to the quality and robustness of the Factor Index, the Index Committee will determine to amend the Factor Index methodology without further notice.
In case of a material change, the Index Committee will determine whether to implement the change or not to proceed. If the determination is not to proceed, this will be announced. If the determination is to proceed, the Administrator shall promptly notify stakeholders and users of its intention to amend the methodology, indicating the effective date of such change. The notification, including a detailed description of the amendment, shall happen according to the instructions set out in the corresponding index description.
4 Cessation Procedure
4.1 Initiation
The Administrator will, in its ordinary course of business, review (i) the liquidity and tradability of the underlying of each Factor Index, (ii) the representativeness and quality of input data, and (iii) the use of and the demand for any Factor Index.
If the Administrator comes to the conclusion that a Factor Index no longer fulfils the intended purpose, and that this cannot be remedied by an adjustment, as detailed in the Factor Index description, or a change procedure, as described above, the Administrator will follow the procedure laid out below.
4.2 Implementation
First of all the Administrator will review the economic and financial impact that might result from such a cessation to ensure an appropriate and proportionate approach. In particular the Administrator will consider (i) the selection of possible alternatives, (ii) the feasibility of maintaining any parallel Factor Indices, and (iii) timing aspects for the cessation. Based on the analysis, the Factor Oversight Committee will approve or reject the proposal to cease calculation and distribution of the benchmark.
The Administrator will notify as soon as possible all stakeholders and users of the intent to cease the calculation and publication of the Factor Index and provide as much information with regard to timelines as reasonably possible. The notification will follow the instructions set out in the corresponding index description.
If practicable, the Administrator would continue to calculate the Factor Index for an announced period of time to accommodate stakeholders and users the opportunity to transition to an alternative index or otherwise prepare for the termination of the Factor Index. Comprehensive guidance shall be made available, where possible, to all stakeholders and users on potential replacements for the Factor Index.
5 Policy Review
The policy shall be reviewed and updated accordingly on an annual basis.
Please note that Commerzbank has reached an agreement to sell its Equity Markets & Commodities business, which includes the issuance and trading of investment and leverage products as well as the administration of indices, to Société Générale S.A. As part of the transaction Commerzbank envisages the discontinuance of its administration role in respect of indices within the next few years.