Dow Jones Announces Index Methodology Enhancements

Effective with the open of trading on September 20, offshore-companies with a primary listing on a U.S. stock exchange will be eligible to be included in the Dow Jones U.S. Total Stock Market Index. Also effective with the open of trading on September 20, companies that are listed on the Korean Securities Dealers Automated Quotations (KOSDAQ), a trading board of the Korea Exchange (KRX) in South Korea, will be eligible to be included in the Dow Jones Global and Dow Jones Global Total Stock Market indexes.  

According to the announcement, the modification to the U.S. Total Stock Market Index addresses the consequences of a change in U.S. tax law, where a number of offshore-companies with a primary U.S. listing decided to transfer their domicile of incorporation to other financial centers such as Ireland and Switzerland. Previously, the companies were included in the index of the country to which they transferred their incorporation. As a result, the indexes tracking those countries’ markets no longer provided an accurate measure of local equities trading because of the inclusion of non-local companies.  

Regarding the second announced enhancement, the announcement said currently, Dow Jones Indexes includes stocks from the Korea Stock Exchange, the stock market division of KRX. As of July 16, 2010, there are 966 companies listed on KOSDAQ, which will be screened for inclusion. These companies have a free-float market capitalization of approximately $41 billion.  

Included in the Dow Jones Global Total Stock Market Index universe are common shares and other securities with the characteristics of common equities from countries that provide accessibility to nonresidents and availability of real-time and historical market data. To produce the investable securities universe, the equities included in the broad market are screened to exclude securities without readily available prices. Companies that survive this analysis have their shares outstanding adjusted for “float,” which is those shares readily available for trading by investors.  

The Dow Jones Global Index universe is defined as all equity securities in 51 countries. The Dow Jones Global Index family covers only those countries that are accessible to nonresidents and that provide access to real-time and historical market data. Eligible for selection are all equity securities that trade on the major exchanges of these countries, screened for liquidity (no more than ten non-trading days in the three months prior to selection). 

For Emerging Market countries with significant barriers to direct foreign investment, Dow Jones Indexes may opt to include in the indexes those issues directly listed on U.S. exchanges, such as Depositary Receipts (DRs) and other types of offshore listings.