STOXX Changes Country Classification Model

• improve on the quality of the input data, aiming to timeliness and completeness on a constant basis;
• stick to the rules-based approach;
• yet introducing some element of informed decision-taking, acknowledging that the classification of a country cannot solely rely on hard facts, but some judgment may need to be applied in order to reflect the political, social and economic reality;
• render the rules responsive to an ever-changing environment;
• introduce elements of public governance.

As a result of the overhaul process, the model has been changed as follows:

• data sources have been revised, relying as much as possible on reliable, publicly available, easy to understand and widely used and accepted data;
• thresholds, where applied, have been made dynamic, so that they adapt to evolving market conditions and take into account the relative positioning of countries;
• particular attention is placed on howa country can move from one classification level to the other:
• an automatic change takes place when the new classification level is confirmed
• otherwise, an informed decision by STOXX is required
• a Watch List has been introduced, to observe the countries that may change classification
• a final validation of the classification is required, to prevent classification biases from contingent events;
• a public governance indicator, based on regulatory quality, political stability and control of corruption has been introduced.

General principles will continue to apply:

• a formal reassessment of all country classifications is done annually in Q1, when a final classification assignment decision is made for each country. A public announcement of any classification changes resulting from the annual reassessment is released latest by April of each year. Implementation of the classification changes occurs with the quarterly index review in Q3 of the same year;
• STOXX will review the regional classifications and index compositions in case a country announces changes to its currency and its companies adopt a new local currency at a future date. Changes will be implemented with two trading days’ notice provided that orderly trading in the original currency is possible following the announcement;
• in addition, STOXX generally reviews a country’s eligibility to any index at short notice in case of major market disruptions in that country;
• The general spirit in which the Country Classification is managed follows the principles of maintaining market integrity while striving to minimize unnecessary client impact.

The table below provides a comparative overview of the changes of the STOXX Country Classification model: