Market Pricing and/or Data Disruption

 

Acts of God, natural disasters, market stress, and other uncontrollable events may cause operational disruptions for data and information providers for each respective index. This in turn may result in inaccurate or delayed posting of reference rates, or inaccurate or delayed delivery of prices, security disclosure data updates, for one or more constituents of an index. In addition, market events such as trading suspensions or other transaction disruptions could inhibit the availability of updated input information for an index. In order to maintain the adherence and integrity of an index methodology during periods of market or data disruption, MFCo implements certain protocols to address different types of disruptions:

 

External Disruptions

 

  • Trading Suspension of Index Constituents

 

  • Description – The halting or suspension of trading in any individual index constituent security for a certain period of time. Suspensions may be officially ordered by a regulatory or supervisory authority with legal power to mandate the suspension (ex. SEC decree of suspension in trading of a stock), or by policy enforcement of the exchanges, over-the-counter networks, or other officially recognized market mediums, as set for in their respective rules.

 

  • Remediation – If the trading of an index constituent security is halted or suspended, the constituent will remain in the respective index at its carrying value as of the last day of available pricing. If the halt or suspension occurs on, or continues through, a rebalancing day, the constituent remains in the respective index at its last available carrying value for rebalancing purposes. If  the security remains continuously halted or suspended from trading past the 1-month anniversary of its initial halt or suspension (if the 1-month anniversary is not a trading/business day, then the next successive trading/business day) the security is removed from the respective index as of this day at a market value of .00000001.

 

  • Unscheduled Market Closures

 

  • Description – The markets and trading of Index constituents may be interrupted by unscheduled market closures, which would affect all securities that are traded within the particular market, or specific exchange medium, that experiences the unscheduled closure. Unexpected closures may occur due to natural events (ex. severe weather or disaster), operational failures (ex. power outages, or computer equipment failures), or other unfortunate occurrences (ex. acts of terrorism, or national day of mourning)

 

  • Remediation – Since an unscheduled Market Closure is affected either by regulatory or industry authority (ex. SEC, SIFMA, etc.), or by the particular exchange medium on which the affected security trades (ex. the NYSE, NASDAQ, etc.), any Unscheduled Market Closure for the trading of a constituent security in an index results in the constituent security remaining in the index at the security’s last available price. If all the constituent securities of an index trade in the same market, or on the same exchange medium, then the Unscheduled Market Closure results in a non-valuation day for the affected index (identical to a weekend or market holiday).

 

  • Data, Price, Indicator, or Other Informational Input Component Disruption

 

  • Description – 3rd-party aggregators/disseminators of market pricing, security disclosure information, reference rates, and other 3rd-party indexes that are utilized as inputs into the calculation of MFCo indexes may also experience unforeseen disruptions, which are out of the control or influence of MFCo.

 

  • Remediation – If the 3rd-party aggregator/disseminator or source of input information for any particular security experiences a disruption whereby the data to be provided to, or directly obtained by MFCo for use in the calculation of any index, the last available value provided will continue to be used in the respective index calculation. To the extent the 3rd-party aggregator/disseminator or source of input information retroactively updates the disrupted data points at a later date from the date of disruption, then MFCo will retroactively update the affected index calculations to amend the index’s history and restate the index to account for the affected period.

 

Internal Disruptions

 

  • Unforeseen Technical Difficulties

 

  • Description – MFCo may experience disruptions in the index calculation and administration process due to unforeseen circumstances out of its control, similar to the disruptions that may affect exchanges and 3rd-party providers. MFCo has operational and technological systems and processes in place to quickly and efficiently mitigate disruptions of its operations, to the extent possible, including the use of backup contractual service providers.

 

  • Remediation – MFCo will endeavor to fix any unforeseen technical difficulties as soon as possible. Any effects to the calculation results of an index as the result of unforeseen technical difficulties will be updated, amended and/or restated retroactively as warranted to preserve the history and integrity of the respective index and its data.

 

Communication and Transparency

 

MFCo commits to providing exceptional transparency to the market and its clients with respect to any Market Pricing and/or Data Disruption, including the announcement of any disruptive event in effect on a timely basis, which describes the remediation MFCo is undertaking with respect to the disruptive event, the expected remediation timeline, and the expected results of the remediation. In the event of an extraordinary disruptive event outside the scope of this section, the Index Committee will exercise professional discretion within the framework of its Code of Conduct, all the doctrine set forth in the Master  Index Administration and Advisory Policies, and the Rules and Methodology for each affected index.

© 2020 Mark Fontanilla & Co., LLC