Robust governance, transparency and integrity have always been at the foundation of our business
The anticipated regulation of benchmarks as well as stakeholder-demanded governance improvements mean that strong governance is a primary concern for our clients. We are committed to leading global best practice standards in index governance and have established a reputation for transparent, robust and rules-driven index construction.
Our governance framework
To ensure that FTSE Russell indexes are constructed, maintained and operated to the highest standards, FTSE Russell employs a robust governance framework to approve new indexes and changes to the methodologies of existing indexes. The framework combines specialist decision-making bodies with members drawn from first line executive management, an oversight committee with members drawn from second line (risk and compliance) and third line (audit) management, supported by and a set of independent external advisory committees formed of market practitioners with specialist expertise on benchmark methodologies, input data and the underlying market.
FTSE Russell has issued a Statement of Compliance with respect to the recommendations made by the International Organization of Securities Commissions (IOSCO) in the Principles for Financial Benchmarks Final Report (the IOSCO Principles). Independent assurance of the assertions by FTSE Russell in its Statement of Compliance has been received from KPMG LLP. FTSE Russell fully embraces the IOSCO Principles and endorses IOSCO’s objective to address conflicts of interest in the benchmark-setting process, enhance the reliability of benchmark determinations, and promote transparency and openness.
European Benchmark Regulation
The FTSE Russell governance framework is designed to meet the requirements of the European benchmark regulation that applies from 1 January 2018. FTSE International Limited will apply to the United Kingdom Financial Conduct Authority for authorisation as an EU based administrator of benchmarks in 2018. The application will cover all FTSE, Russell, FTSE TMX and MTS indexes known to be used as benchmarks in the European Union. The fixed income indexes acquired from Citigroup Indices LLC in August 2017 will continue to be administered by that body, now renamed FTSE Fixed Income LLC, according to the third country transitional provisions afforded by the regulation until such time as the administration of those indexes has been assumed by FTSE International Limited. Further details are available at http://www.ftserussell.com/eu-benchmark-regulation.
ESMA Guidelines on ETFs and other UCITS issues
ESMA’s guidelines on ETFs and other UCITS issues, first published in December 2013 and updated in August 2014, require that the financial indexes that form the basis of index-tracking UCITS should meet certain requirements with respect to, inter alia, diversification limits, the transparency of the methodology, and the availability of the weights of the index constituents.
To assist our clients in undertaking a compliance review of the financial indexes that form the basis of their UCITS and UCITS ETFs products, FTSE Russell has published a statement that summarises FTSE Russell’s position in relation to the ESMA Guidelines. The weights of the constituents for the Russell indexes and FTSE indexes can be found here.
US ETF Listing Standards
A set of requirements similar to the ESMA guidelines will apply to US ETFs from 1 January 2018. Factsheets providing information that will allow ETF issuers to assess whether a particular FTSE Russell index will meet the standards are being prepared