J.P. MORGAN EXCHANGE-TRADED FUND TRUST
277 PARK AVENUE
NEW YORK, NEW YORK 10172
VIA EDGAR
November 14, 2019
Alison White
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: J.P. Morgan Exchange-Traded Fund Trust (the “Trust”)
File Nos. 333-191837; 811- 22903
Post-Effective Amendment No. 236
Dear Ms. White:
This letter is in response to the comments you provided telephonically on October 24, 2019 with respect to the filing related to the JPMorgan BetaBuilders International Equity ETF (the “Fund”). Our responses to your comments are set forth below. Except as otherwise noted below, we will incorporate the changes referenced below into the Trust’s Registration Statement in a filing made pursuant to Rule 485(b) under the Securities Act of 1933 (the “485(b) Amendment”). Capitalized terms used but not defined in this letter have the meanings given to them in the Fund’s Registration Statement.
1. | Comment: Please update the series information on EDGAR with the Fund’s ticker. |
Response: The update will be made prior to the launch of the Fund.
2. | Comment: Please provide supplementally the rules-based methodology for the Morningstar® Developed Markets ex-North America Target Market Exposure IndexSM, the Fund’s underlying index (the “Underlying Index”). |
Response: Attached to this letter as Appendix A is the rules-based methodology for the Underlying Index.
3. | Comment: The “What are the Fund’s Main Investment Strategies” section of the Prospectus includes reference to the Fund’s investment in “stapled securities.” Please consider adding language to provide a definition of “stapled securities.” |
Response: The requested information will be included in the 485(b) Amendment.
1
We hope that the Staff finds this letter responsive to the Staff’s comments. Should members of the Staff have any questions or comments concerning this letter, please call the undersigned at (212) 648-0152.
Sincerely,
/s/ Anthony Geron
Anthony Geron
Assistant Secretary
2
Appendix A
For Professional Use Only
Construction Rules for the Morningstar® Global Target Market Exposure Index Family
Morningstar Indexes
July 2019
Contents | ||
1 | Overview | |
2 | Index Construction | |
2.1 | Assigning Stocks to the Index | |
2.2 | Number of Stocks | |
2.3 | Index Weighting | |
3 | Index Maintenance and Calculation | |
3.1 | Scheduled Maintenance | |
3.2 | Corporate Action | |
3.3 | Index Calculation and Price Data | |
4 | Methodology Review and Index Cessation Policy | |
5 | Data Correction and Precision | |
5.1 | Intraday Index Data Corrections | |
5.2 | Index-Related Data and Divisor Corrections | |
5.3 | Computational and Reporting Precision | |
6 | Appendixes | |
6.1 | Glossary | |
6.2 | Country Inclusion Framework and List of Developed and Emerging Markets | |
6.3 | Eligible Securities | |
6.4 | Eligible Exchanges | |
6.5 | Tax Haven List | |
6.6 | Free Float | |
6.7 | Individual Indexes | |
6.8 | Modification to Rulebook | |
7 | About Morningstar |
Overview
The Morningstar® Global Target Market Exposure IndexSM is designed to provide exposure to the top 85% market capitalization by free float in each of two economic segments, developed markets and emerging markets. Together, these two economic segment indexes make up the Global Target Market Exposure Index.
Index Inception Date and Performance Inception Date
The inception date of the index is May 1, 2018, and the performance inception date of the index is June 20, 2008, when the first back-tested index value was calculated.
Index Construction
Exhibit 1 Morningstar Global Target Market Exposure Index Construction Process
For additional details, refer ‘to Assigning stocks to the Morningstar Global Target Market Exposure Index section’
Page 2 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
Assigning Stocks to the Morningstar Global Target Market Exposure Index Selection Universe |
At each reconstitution, securities for the Morningstar Global Target Market Exposure Index are derived from eligible universe described below. |
u Exchange: The security must trade on one of the major global exchanges. A complete list of eligible exchanges is provided in Appendix 4. |
u Security type: All listed securities, including income trusts in Canada, real estate investment trusts, and preferred shares that exhibit characteristics of equity securities, are generally eligible. Please see Appendix 3 for a full list of eligible security types by country. The following security types do not qualify: |
u Mutual funds u Exchange-traded funds u Derivatives u Convertible notes, warrants, and rights u Limited partnerships u Depositary receipts, except Swedish depositary receipts, Philippine depositary receipts and American Depositary Receipts |
American Depository Receipts (ADR) are eligible for inclusion in the index if no equity listing is available for the company |
u Country classification: Each security in the Morningstar global equity universe shall be assigned to a single country using a rules-based approach. The country classification for any security is defined primarily by the country of incorporation of the issuing company and the country of primary listing of the security. In addition, if a company is incorporated in a developed-market country in Europe and has its security’s primary listing in another developed-market European country, the security will be assigned to its country of primary listing. Nearly 98% of the securities in the Morningstar global equity universe are classified using this approach. |
For the remaining cases, in which a company is incorporated in one country but the primary listing of its securities is in a different country, additional factors are considered to determine the country classification: |
u Primary business and listing country: If a security has a listing in the country where its primary business is conducted, as measured by maximum single revenue segment, the security will be assigned to its country of listing and primary business location. |
u Tax havens: To benefit from legal, tax, and/or regulatory advantage, companies may incorporate in a country with limited or no public domestic equity market such as Bahamas or Bermuda. For such cases, the security is classified in the country of its primary listing. A complete list of countries that have been determined to provide these benefits can be found in Appendix 5. |
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u China classification: Securities will be classified to China if the company is incorporated in the People’s Republic of China, or PRC, and listed on the Shanghai or Shenzhen stock exchanges as B shares or listed on the Hong Kong stock exchange as H shares. To provide investors with exhaustive China coverage and remain true to the underlying risks associated with the business, the following exception is made to the country of incorporation and country of primary listing agreement rule. Securities will be classified to China if the company is incorporated outside the PRC but has a listing in the U.S., Singapore, or Hong Kong, provided it meets the following criteria: u If a company is listed in the U.S. or Singapore but has the majority of its business as measured by single revenue segment contributing 50% or more from China and is headquartered in China. u If the company is listed in Hong Kong and meets the following definitions: Red chip: Company is directly or indirectly controlled by organizations or enterprises that are owned by the state, provinces, or municipalities of the PRC. P chip: A company satisfying at least two of the following conditions: The company is controlled by PRC individuals. The company derives more than 80% of its revenue from the PRC. The company allocates more than 60% of its assets in the PRC.
Security Selection To be eligible for the index, all constituents must meet the following criteria: u Trading frequency:
u Global ex-US: New securities qualify for the investable universe if they have fewer than 20 nontrading days in the six calendar months immediately before reconstitution. For corporate entities younger than six months, the criterion is applied on a prorated basis.
Current constituents are provided a one-time buffer and will remain in the investable universe if they have fewer than 30 nontrading days in the prior six months. The buffer is designed to help reduce turnover in the investable universe caused by a marginal and temporary decline in the number of trading days. Current constituents retained because of the buffer in the previous reconstitution would remain in the investable universe if they have fewer than 20 nontrading days in the prior six months.
u US: Securities qualify for the investable universe if they have fewer than 10 nontrading days in the last quarter immediately before reconstitution
u Trading volume and turnover: A security’s traded value score, or TVS, is the average of its ranks on three measures: u The average of monthly dollar traded value, or AMDTV, for the six calendar months immediately before reconstitution. Monthly dollar traded value, or MDTV, is the product of |
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Page 4 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
the average of number of shares traded in the month and the closing price of the security as of the last trading day of the month. For corporate entities younger than six months, MDTV is computed on a prorated basis.
u The two lowest MDTV in the six calendar months immediately before reconstitution (the months need not be sequential).
u The average monthly turnover ratio, or AMTR, during the six calendar months immediately before reconstitution. AMTR is AMDTV divided by float market value, in U.S. dollars, as of the end of the last trading day before reconstitution. This measure is not used to calculate TVS for US constituents.
Securities are added to the investable universe if they are among the top 75% of the securities in based on their TVS in the respective universe: US, Developed ex-US and Emerging Markets
Liquidity criterion is waived in cases of certain corporate events, such as takeovers or spin-offs, where the successor entity issues one or more securities that meets any of the following criteria:
u The new entity qualifies for index membership in either the mid- or large-cap band.
u The new entity’s free-float market-capitalization value is greater than or equal to the smallest free-float market capitalization in the mid-cap band.
u Free float: Each security should have a minimum free float of 10%.
u Equity Market Cap Cutoff Calculation:
u Minimum equity market cutoff is calculated as of every reconstitution cutoff date based on the returns of Morningstar Developed Markets PR USD using the formula below.
(Minimum market cap)t-1 * (1 + Return on Developed Markets Index6-month)
The minimum market cap was initialized to 200 million USD as of March 2008.
u Every security must have a company full market cap greater than the minimum equity cutoff determined above
u Every security must also have a security float market cap greater than 50% of the minimum equity market cutoff
For more details on Morningstar’s definition of free float, refer to Appendix 6.
Companies with Multiple Share Classes
For companies with multiple share classes of equity securities, the following general rules apply:
u All trading classes that meet the general eligibility criteria are considered for inclusion.
u The market capitalization of a company is determined by aggregating all listed share classes. This aggregate market capitalization is used to assign companies to market-capitalization bands, which is described in detail in the following section. |
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u The weight contribution of a given share class in an index is based on the free-float market capitalization of that share class.
Morningstar Global Target Market Exposure Index Each security that meets the selection criteria above is considered for one of two economic segment indexes: developed or emerging. The country classification process previously described determines membership in the appropriate index.
Calculating the Economic Segment-Level Capitalization Breakpoints Companies in Developed Market economic segment are ordered by company full market cap in descending order, and the cumulative free float company market cap is calculated. Upper and Lower bounds for each capitalization are calculated as below
u Developed Markets Large-Cap Breakpoint: If the cumulative free float company market cap of the security ranked at the same rank that determined the large-cap minimum size reference at the last reconstitution falls between 70% and 71%, existing rank is retained as current large-cap minimum size reference, else the rank is reset to 70% if it is less than 70% or 71% if it is more than 71%.
u Developed Markets Mid-Cap Breakpoint: If the cumulative free float company market cap of the security ranked at the same rank that determined the mid-cap minimum size reference at the last reconstitution falls between 85% and 85.5%, existing rank is retained as current mid-cap minimum size reference, else the rank is reset to 85% if it is less than 85% or 85.5% if it is more than 85.5%.
For Emerging Markets, the cutoffs are 0.5 times the cutoffs calculated for Developed Markets.
Finally, an upper and lower bound is taken around each of the capitalization breakpoints (large, mid, and small). The upper bound is 1.15 times the breakpoint, and the lower bound is 0.5 times the breakpoint. For example, if the developed-market large-capitalization breakpoint is $10 billion, then the upper bound is $10 billion * 1.15 = $11.5 billion and the lower bound is $10 billion * 0.5 = $5 billion.
Calculating the Country-Level Capitalization Breakpoints The capitalization breakpoints calculated in the previous section are applied within each country to arrive at the country-specific capitalization breakpoints. For each country, the companies are ordered by company full market cap in descending order, and the cumulative market-capitalization percentages for the companies are calculated. The market capitalization of the largest stock whose cumulative cap percentage is greater than the following values is taken as the initial capitalization breakpoint for that cap band:
u Large Cap: 70% u Mid Cap: 85% |
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Page 6 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
If the initial country-specific breakpoint is smaller than the economic segment-level capitalization lower bound, then the country-specific breakpoint is set to the economic segment-level capitalization lower bound. If the initial country-specific breakpoint is between the upper economic segment-level capitalization and lower economic segment-level capitalization bounds, then no adjustment is made.
Assigning Companies to Capitalization Bands The adjusted country-level capitalization breakpoints calculated in the previous section are applied within each country to assign companies to one of three capitalization bands: large, mid, and small. All companies that have a market capitalization greater than the large-cap adjusted capitalization breakpoint are assigned to that large-cap band. The same goes for the mid- and small-cap bands.
Capitalization Bands Buffer A buffer is applied around the capitalization bands to reduce turnover from small changes in market capitalization.
u An existing constituent is retained in its current size segment if its company full market capitalization is more than 0.5 times the country-specific size segment breakpoint. u A new constituent is included in the size segment index only if its company full market capitalization is more than twice the country-specific size segment breakpoint.
Determining Global Target Market Exposure Index The developed- and emerging-market indexes together form the Global Target Market Exposure (TME) Index. Once index constituents are selected, each security is weighted by its float-adjusted market capitalization for index calculation purposes. Multiple share classes are included and also weighted by the available float of each share class (please see the section on multiple share class treatment above).
Subsequently, individual regional and country TME indexes are derived from the constituents of the Morningstar Global Target Market Exposure Index.
Number of Stocks The number of stocks in the index is subject to the selection and eligibility criteria at the time of reconstitution.
Index Weighting The index is float market capitalization weighted. For Morningstar Brazil Target Market Exposure Capped Index, 5-10-40 capping is applied on individual constituents with a buffer of 10%. If 5-10-40 capping is breached at rebalancing, the individual constituent weight is capped at 9% and constituents with weights greater than 4.5% cannot exceed 36% of the portfolio weight. For more details, refer to the Morningstar Indexes Calculation Methodology rulebook. |
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Index Maintenance and Calculation Scheduled Maintenance The index is reconstituted semiannually and implemented after the close of business on the third Friday of June and December and is effective the following Monday. If Monday is a holiday, reconstitution is effective on the immediate following business day. The market data used for reconstitution is as of the last trading day of April and October.
The index is rebalanced quarterly and implemented after the close of business on the third Friday of March, June, September, and December and is effective the following Monday. If Monday is a holiday, rebalance is effective on the immediate following business day.
Refer to Appendix 1 for details on reconstitution and rebalancing.
Corporate Action The treatment of corporate actions can be found in Morningstar Indexes Corporate Actions Methodology rulebook.
Index Calculation and Price Data Details about index calculations and price data can be found in their respective rulebooks: Morningstar Indexes Calculation Methodology and Equity Closing Prices Used for Index Calculation.
Methodology Review and Index Cessation Policy The index methodology is continually reviewed to ensure it achieves all stated objectives. These reviews take into account corporate action treatment, selection, and maintenance procedures. Subscribers to the index will be notified before any methodology changes are made. For more details, refer to the Morningstar Index Methodology Change Process.
Morningstar also notifies all subscribers and stakeholders of the index that circumstances might arise that require a material change to the index, or a possible cessation of the index. Circumstances that could lead to an index cessation include, but are not limited to, market structure change, product definition change, inadequate supply of data, insufficient revenue associated with the index, insufficient number of clients using the index, and/or other external factors beyond the control of the Morningstar Index Committee.
Because the cessation of the index or benchmark index could disrupt subscriber products that reference this index, all subscribers are encouraged to have robust fallback procedures if an index is terminated. For more details, refer to the Morningstar Index Cessation Process. |
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Data Correction and Precision Intraday Index Data Corrections Commercially reasonable efforts are made to ensure the accuracy of data used in real-time index calculations. If incorrect price or corporate action data affect index daily highs or lows, they are corrected retroactively as soon as is feasible.
Index-Related Data and Divisor Corrections Incorrect pricing and corporate action data for individual issues in the database will be corrected upon detection. In addition, an incorrect divisor of an index, if discovered within five days of its occurrence, will always be fixed retroactively on the day it is discovered to prevent an error from being carried forward. Commercially reasonable efforts are made to correct an older error subject to its significance and feasibility.
For more details, refer to the Recalculation Guidelines.
Computational and Reporting Precision For reporting purposes, index values are rounded to two decimal places and divisors are rounded to appropriate decimal places. |
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Appendixes
| ||
Appendix 1 Glossary | ||
Terms
| Description
| |
Reconstitution | Each reconstitution involves the following: | |
· Updating the global market’s investable equity universe. | ||
· Reviewing the economic segment- and country-level size segment breakpoints. | ||
· Assigning companies to capitalization bands taking into account the buffer zones. | ||
· Changes in index shares (free float, total shares outstanding, index-specific adjustment factor) of each constituent. | ||
Rebalance | During each rebalancing, the weights are adjusted for updated free-float and shares outstanding data.
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Appendix 2: Country Inclusion Framework A country must maintain its passable status for two consecutive years before it is deemed eligible for the index. The Morningstar Index Committee will review all potential changes to determine any final action. If a country is added or removed, notice of the pending action is provided a minimum of three months in advance. This framework considers three main criteria:
u Degree of economic freedom u A score of 50 or above from the Index of Economic Freedom. u Country income u A high- or middle-income country classification from the World Bank. u Depth of equity markets u More than $5 billion in market capitalization. u Ratio of market capitalization/GDP must be among the top 80%.
Index of Economic Freedom The Index of Economic Freedom is a joint study by the Heritage Foundation and The Wall Street Journal that measures countries according to 10 factors of economic freedom: u Business freedom u Fiscal freedom u Monetary freedom u Financial freedom u Freedom from corruption u Trade freedom u Government size u Investment freedom u Property rights u Labor freedom |
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World Bank Country Classification For operational and analytical purposes, the World Bank’s main criterion for classifying economies is gross national income, or GNI, per capita. The bank’s analytical income categories (low, middle, and high) are based on the bank’s operational lending categories (civil works preferences, International Development Association eligibility, etc.). These operational guidelines were established three decades ago based on the view that since poorer countries deserve better conditions from the bank, comparative estimates of economic capacity needed to be established. GNI, a broad measure, was considered the best single indicator of economic capacity and progress; at the same time, it was recognized that GNI does not, by itself, constitute or measure of welfare or success in development. GNI per capita is therefore the bank’s main criterion of classifying countries.
Country Market Capitalization and Country Market Capitalization/GDP Ratio The size of a country’s equity markets should be material, or above $5 billion. The market should exhibit financial depth; that is, the ratio of the size of the country’s equity markets to its gross domestic product should be high. Countries that fall in the bottom 20% are ineligible for the index.
Additional Country Inclusion Criteria The following criteria are taken into account when determining country eligibility: u The country’s allowance of foreign investors to easily enter and exit the market, as well as to repatriate capital and dividends. u Timely and accurate availability of real-time and historical market data. u The level of interest attracted by the market from international investors.
Developed- and Emerging-Market Classification Countries are classified as developed if they meet all of the following criteria: u Annual per capita GNI falls in the high-income category, as defined by the World Bank, for the most recent three years. u The country must not have any broad-based discriminatory controls against nondomiciled investors for the most recent three years. u The country’s stock markets must exhibit these characteristics: u Transparency u Market regulation u Operational efficiency u Absence of broad-based investment restrictions
Countries that do not meet all of the above criteria fall into the emerging-markets economic segment. For example, a country may be classified as high-income by the World Bank, but because of a lack of transparency within local markets, it falls into the emerging-markets economic segment. |
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Classification | Country | Classification | Country | |||||
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Developed | Australia | Emerging | Brazil | |||||
Austria | Chile | |||||||
Belgium | China | |||||||
Canada | Colombia | |||||||
Denmark | Czech Republic | |||||||
Finland | Egypt | |||||||
France | Greece | |||||||
Germany | Hungary | |||||||
Hong Kong | India | |||||||
Ireland | Indonesia | |||||||
Israel | Malaysia | |||||||
Italy | Mexico | |||||||
Japan | Pakistan | |||||||
Netherlands | Peru | |||||||
New Zealand | Philippines | |||||||
Norway | Poland | |||||||
Portugal | Qatar | |||||||
Singapore | Russia | |||||||
Spain | Saudi Arabia | |||||||
Sweden | South Africa | |||||||
Switzerland | South Korea | |||||||
United Kingdom | Taiwan | |||||||
United States | Thailand | |||||||
Turkey | ||||||||
United Arab Emirates | ||||||||
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Appendix 3: Eligible Securities
Equity and equitylike securities are eligible for the index. Security eligibility is reviewed semiannually during April and October.
Classification | Country | Security Class | ||
Developed Market | Australia | Ordinary Shares Preferred Shares Stapled Securities | ||
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Austria | Ordinary Shares Preferred Shares Units/Certificates | |||
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Belgium | Ordinary Shares Preferred Shares | |||
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Canada | Ordinary Shares Units of Income Trusts Stapled Securities | |||
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Denmark | Ordinary Shares | |||
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Finland | Ordinary Shares | |||
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France | Ordinary Shares Preferred Shares Certificats d’Investissement Certificats Coopératif d’Investissement | |||
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Germany | Ordinary Shares | |||
Preferred Shares |
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Hong Kong | Ordinary Shares | |||
Business Trusts | ||||
Stapled Securities | ||||
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Ireland | Ordinary Shares | |||
Units | ||||
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Israel | Common Shares | |||
Preferred Shares | ||||
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Italy | Ordinary Shares | |||
Preferred Shares | ||||
Savings Shares | ||||
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Japan | Ordinary Shares | |||
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Netherlands | Ordinary Shares | |||
Preferred Shares | ||||
Certificates | ||||
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New Zealand | Ordinary Shares | |||
Preferred Shares | ||||
Certificates | ||||
Stapled Securities | ||||
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Norway | Ordinary Shares Certificates | |||
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Portugal | Ordinary Shares | |||
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Singapore | Ordinary Shares | |||
Business Trust | ||||
Stapled Securities | ||||
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Spain | Ordinary Shares | |||
Preferred Shares | ||||
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Sweden | Ordinary Shares | |||
Swedish Depositary Receipts | ||||
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Switzerland | Ordinary Shares | |||
Certificates | ||||
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United Kingdom | Ordinary Shares | |||
Units | ||||
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United States | Ordinary Shares | |||
REIT | ||||
Tracking Stocks | ||||
Classification | Country Name | Security Class | ||
Emerging Market | Brazil | Ordinary Shares | ||
Preferred Shares | ||||
Units | ||||
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Chile | Ordinary Shares | |||
Preferred Shares | ||||
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China | B Shares | |||
H Shares1 | ||||
P Chip1 | ||||
Red Chip1 | ||||
Stapled Securities | ||||
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Colombia | Ordinary Shares | |||
Preferred Shares | ||||
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Czech Republic | Ordinary Shares | |||
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Egypt | Ordinary Shares | |||
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Greece | Ordinary Shares |
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Preferred Shares
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Hungary | Ordinary Shares | |||
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India | Ordinary Shares | |||
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Indonesia | Ordinary Shares | |||
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Malaysia | Ordinary Shares Stapled Securities | |||
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Mexico | Ordinary Shares | |||
Units | ||||
Certificate of Participation | ||||
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Pakistan | Ordinary Shares | |||
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Peru | Ordinary Shares | |||
Preferred Shares | ||||
Investment Shares | ||||
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Philippines | Ordinary Shares | |||
Philippine Depositary Receipts | ||||
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Poland | Ordinary Shares | |||
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Qatar | Ordinary Shares | |||
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Russia | Ordinary Shares | |||
Preferred Shares | ||||
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Saudi Arabia | Ordinary Shares | |||
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South Africa | Ordinary Shares | |||
Preferred Shares | ||||
Units | ||||
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South Korea | Ordinary Shares | |||
Preferred Shares | ||||
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Taiwan | Ordinary Shares | |||
Preferred Shares | ||||
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Thailand | Ordinary Shares | |||
Preferred Shares | ||||
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Turkey | Ordinary Shares | |||
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United Arab Emirates | Ordinary Shares |
1 The H shares, P chip, and the Red chip securities are listed at the Hong Kong stock exchange.
Appendix 4: Eligible Exchanges
Securities listed on eligible market segments are eligible for the index. Exchange eligibility is reviewed semiannually during April and October.
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Classification | Country | Eligible Exchange | Eligible Market Segment | Ineligible Market Segment | ||||
Developed Market | Australia | Australian Securities Exchange | Official List | |||||
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Austria | Vienna Stock Exchange | Prime Market | Mid Market-MTF | |||||
Standard Market | ||||||||
Mid Market-Regulated | ||||||||
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Belgium | Euronext Brussels | Euronext | Free Market Segment | |||||
Alternext | ||||||||
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Canada | Toronto Stock Exchange | Official List | ||||||
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Denmark | Copenhagen Stock Exchange | Main Market | ||||||
First North | ||||||||
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Finland | Helsinki Stock Exchange | Main Market | ||||||
First North | ||||||||
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France | Euronext Paris | Euronext | Free Market Segment | |||||
Alternext | ||||||||
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Germany | Deutsche Borse Xetra | Prime Standard | Entry Standard | |||||
General Standard | ||||||||
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Hong Kong | Hong Kong Stock Exchange | Main Board | ||||||
Growth Enterprise Market(GEM) | ||||||||
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Ireland | Irish Stock Exchange | Main Securities Market | ||||||
Enterprise Securities Market | ||||||||
| ||||||||
Israel | Tel Aviv Stock Exchange | |||||||
| ||||||||
Italy | Borsa Italiana | MTA | MIB | |||||
AIM Italia-MAC | ||||||||
| ||||||||
Japan | Tokyo Stock Exchange | First Section | Other | |||||
Nagoya Stock Exchange | Second Section | |||||||
Mothers | ||||||||
JASDAQ | ||||||||
First Section | ||||||||
Second Section | ||||||||
Centrex | ||||||||
| ||||||||
Netherlands | Euronext Amsterdam | Euronext | Alternext | |||||
| ||||||||
New Zealand | New Zealand Stock Exchange | Main Board | Fonterra Shareholders’ | |||||
Alternative Market | Market | |||||||
| ||||||||
Norway | Oslo Stock Exchange | Oslo Bors | ||||||
Oslo Axess | ||||||||
| ||||||||
Portugal | Euronext Lisbon | Euronext | Alternext | |||||
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Singapore | Singapore Stock Exchange | Main Board | ||||||
CATALIST | ||||||||
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Spain | Madrid Stock Exchange | Mercado Continuo | ||||||
Mercado Alternativo Bursatil | Growth Companies | SICAVs | ||||||
SOCIMIs | VCCs | |||||||
Hedge Funds | ||||||||
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Sweden | Stockholm Stock Exchange | Main Market | ||||||
First North | ||||||||
AktieTorget | ||||||||
Nordic Growth Market | ||||||||
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Switzerland | SIX Swiss Exchange | |||||||
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United Kingdom | London Stock Exchange | Main Market | ||||||
AIM Market | ||||||||
United States | New York Stock Exchange | |||||||
| Nasdaq | |||||||
NYSE Market LLC | ||||||||
Source: Morningstar. |
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Page 15 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
Classification | Country | Eligible Exchange | Eligible Market Segment | Ineligible Market Segment | ||||
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Emerging | Brazil | BM&F Bovespa SA | Traditional | |||||
Level 1 | ||||||||
Level 2 | ||||||||
Novo Mercado | ||||||||
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Chile | Santiago Stock Exchange | |||||||
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China | Shenzhen Stock Exchange | |||||||
Shanghai Stock Exchange | ||||||||
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Colombia | Colombian Securities Exchange | |||||||
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Czech Republic | Prague Stock Exchange | Prime Market | Start Market | |||||
Standard Market | ||||||||
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Egypt | The Egyptian Exchange | |||||||
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Greece | Athens Stock Exchange | Main Market | Low Dispersion | |||||
Alternative Market | Surveillance | |||||||
Under Suspension | ||||||||
Under Deletion | ||||||||
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Hungary | Budapest Stock Exchange | Prime Market | T Market | |||||
Standard Market | ||||||||
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India | Bombay Stock Exchange | |||||||
National Stock Exchange2 | ||||||||
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Indonesia | Jakarta Stock Exchange | Main Board | ||||||
Development Board | ||||||||
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Malaysia | Kuala Lumpur Stock Exchange | Main Market | PN-17 | |||||
Ace Market | GN-3 | |||||||
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Mexico | Mexican Stock Exchange | Capitals Market | ||||||
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Pakistan | Karachi Stock Exchange | |||||||
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Peru | Lima Stock Exchange | |||||||
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Philippines | Philippine Stock Exchange | Main Board | ||||||
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Poland | Warsaw Stock Exchange | Basic Market | ||||||
Parallel Market | ||||||||
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Qatar | Qatar Stock Exchange | |||||||
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Russian Federation | MICEX | |||||||
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Saudi Arabia | Saudi Stock Exchange | |||||||
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South Africa | Johannesburg Stock Exchange | Main Board | ||||||
AltX | ||||||||
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South Korea | Korea Exchange | KOSPI | KONEX | |||||
KOSDAQ | ||||||||
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Taiwan | GreTai Securities Market | Main Board | Emerging Market Board | |||||
Taiwan Stock Exchange | Main Board | Alternate Trading Method | ||||||
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Thailand | The Stock Exchange of Thailand | Local Stock | Companies to be Delisted Foreign | |||||
Common Stock | ||||||||
Market for Alternative Investment | ||||||||
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Turkey | Istanbul Stock Exchange | National Market | ||||||
Second National Market | ||||||||
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United Arab Emirates | Abu Dhabi Securities Exchange | |||||||
Dubai Financial Market | ||||||||
NASDAQ Dubai | ||||||||
Source: Morningstar. | ||||||||
2 Only securities listed on the Bombay Stock Exchange are eligible for Index selection. However, the trading volumes from both the Bombay Stock Exchange and the National Stock Exchange are aggregated for liquidity calculation purposes. |
© 2018 Morningstar, Inc. All rights reserved. Morningstar and the Morningstar logo are either trademarks or service marks of Morningstar, Inc.
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Page 16 of 20 | Construction Rules for the Morning star Global Target Market Exposure Index Family| July 2019 |
Appendix 5: Tax Haven List Following is a list of countries that provide some benefits to incorporating in their domicile and are considered tax havens. The tax havens list is reviewed semiannually during April and October.
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Andorra | Isle of Man | |
Anguilla | Jamaica | |
Antigua and Barbuda | Jersey | |
Aruba | Liberia | |
Bahamas | Liechtenstein | |
Barbados | Luxembourg | |
Belize | Marshall Islands | |
Bermuda | Monaco | |
Bonaire St. Eust. Saba | Montserrat | |
British Virgin Islands | Netherlands Antilles | |
Cayman Islands | Panama | |
Channel Islands | Puerto Rico | |
Cook Islands | Saint Barthelemy | |
Curacao | Saint Kitts and Nevis | |
Dominica | Saint Martin | |
Dominican Republic | San Marino | |
Falkland Islands | Seychelles | |
Faroe Islands | Sint Maarten | |
Gibraltar | Solomon Islands | |
Grenada | St. Vincent and the Grenadines | |
Guam | St. Lucia | |
Guernsey | Trinidad and Tobago | |
Haiti | Turks and Caicos Islands | |
Appendix 6: Free Float Morningstar defines free float as the number of shares (or percentage of shares) that are, theoretically, available for the public to purchase. In general, the shareholdings can be classified in two broad categories of holders: institutional holders and declarable stakeholders. The latter hold shares for various tactical or speculative reasons (other than those that might typify why an institutional investor would own the shares). As a result, the shares held by declarable stakeholders are, theoretically, unavailable to the public and therefore excluded from free float.
The formula for calculating free float is: Free float = (total shares outstanding) – (total declarable stakeholder shares)
The following are typically classified as declarable stakeholders: u Officer/director u Joint venture u Private company u Private equity fund/alternative investment u Public company stake u Employee stock ownership fund u Holding company |
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Page 17 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
u Government |
u Sovereign wealth fund |
u Subsidiary |
u Trust/trustee |
u Venture capital fund |
Securities with a free float of 10% or lower are not considered for the index. |
Foreign Ownership Limits |
For some companies, certain restrictions may apply to nondomestic investors that limit their opportunity to invest. Such restrictions, known as foreign share ownership limits, can be set by government regulation, company bylaws, or local laws. Morningstar float is adjusted for foreign ownership limits and will be the lower of the company float or the foreign ownership limit. |
For India, securities on the Reserve Bank of India’s caution list and ban list are not eligible for the index. An existing index constituent that moves to the RBI ban or caution list is deleted from the index with a suitable advance notification. |
© 2018 Morningstar, Inc. All rights reserved. Morningstar and the Morningstar logo are either trademarks or service marks of Morningstar, Inc.
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Page 18 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
Appendix 7: Individual Indexes | ||||
Index Name | Inception Date | Performance Inception Date | ||
Morningstar Global Target Market Exposure Index | May 1, 2018 | June 20, 2008 | ||
Morningstar Developed Europe Target Market Exposure Index | May 1, 2018 | June 20, 2008 | ||
Morningstar Japan Target Market Exposure Index | May 1, 2018 | June 20, 2008 | ||
Morningstar Canada Target Market Exposure Index | May 1, 2018 | June 20, 2008 | ||
Morningstar Developed Asia Pacific ex-Japan Target Market Exposure Index | May 1, 2018 | June 20, 2008 | ||
Morningstar US Target Market Exposure Index | Nov 22, 2018 | June 20, 2008 | ||
Morningstar Asia ex-Japan Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Developed Markets Asia Pacific Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Developed Markets Eurozone Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Developed Markets Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Developed Markets ex-Japan Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Emerging Markets Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Eurozone Target Market Exposure Index | Feb 25, 2019 | June 20, 2008 | ||
Morningstar Emerging Markets Asia Target Market Exposure Index | Feb 26, 2019 | June 20, 2008 | ||
Morningstar Brazil Target Market Exposure 5/10/40 Index | June 10, 2019 | March 21, 2014 | ||
Morningstar Global ex-Canada Target Market Exposure Index | August 7, 2019 | June 20, 2008 | ||
Morningstar Global ex-UK Target Market Exposure Index | August 7, 2019 | June 20,2008 | ||
Morningstar Global ex- Developed Eurozone Target Market Exposure Index | August 7, 2019 | June 20, 2008 | ||
Morningstar Developed Markets ex-North America Target Market Exposure Index | June 10, 2019 | June 20,2008 | ||
Morningstar Developed Europe Mid Cap Target Market Exposure Index | August 27, 2019 | June 20,2008 | ||
Morningstar US Mid Cap Target Market Exposure Index | August 27, 2019 | June 20,2008 |
Appendix 8: Modification to Rulebook | ||||
Section | Description | Update Date | ||
Selection Universe | ADR may be considered for the inclusion in the index if no equity listing is available for the company. | Dec 2018 |
© 2018 Morningstar, Inc. All rights reserved. Morningstar and the Morningstar logo are either trademarks or service marks of Morningstar, Inc.
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Page 19 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
Appendix 2 | Saudi Arabia added to the list of emerging markets | Jun 2019 | ||
Appendix 3 and Appendix 4 | Added eligible exchange and security type for Saudi Arabia | Jun 2019 |
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Page 20 of 20 | Construction Rules for the Morningstar Global Target Market Exposure Index Family| July 2019 |
About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 510,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 17 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries. |
About Morningstar Indexes Morningstar® Indexes combine the science and art of indexing to give investors a clearer view into the world’s financial markets. Our indexes are based on transparent, rules-based methodologies that are thoroughly back-tested and supported by original research. Covering all major asset classes, our indexes originate from the Morningstar Investment Research Ecosystem—our network of accomplished analysts and researchers working to interpret and improve the investment landscape. Clients such as exchange-traded fund providers and other asset management firms work with our team of experts to create distinct, investor-focused products based on our indexes. Morningstar Indexes also serve as a precise benchmarking resource. |
Morningstar Index Committee |
The Morningstar Index Committee is currently comprised of senior officials who possess the appropriate levels of knowledge in relation to Indexes. A wide array of business groups are represented to allow for a broad voice to be heard and for a wider view to be expressed in evaluating all subjects brought up during Committee meetings. The Committee seeks to create indexes of the highest quality that meet the recognized qualities of a good benchmark. |
For More Information |
For any queries, reach out to us via our communication page. |
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©2018 Morningstar. All Rights Reserved. |
Any matter arising from undocumented events will be resolved at the discretion of Morningstar Index Committee. The information in this document is the property of Morningstar, Inc. Reproduction or transcription by any means, in whole or part, without the prior written consent of Morningstar, Inc., is prohibited. While data contained in this report are gathered from reliable sources, accuracy and completeness cannot be guaranteed. All data, information, and opinions are subject to change without notice. This document may contain back-tested or simulated performances and the subsequent results achieved by the investment strategy may be materially different. |
© 2018 Morningstar, Inc. All rights reserved. Morningstar and the Morningstar logo are either trademarks or service marks of Morningstar, Inc.
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