User Guide
Contents
1. SN mark y Markit iBoxx Europe N Index j Version 1 1 NUS Ty i October 2014 ie FHS SS Ve ANN KA Markit iBoxx European ABS Index Guide rk Contents Changes to the Markit iBoxx European ABS 3 1 PPC OCU ca faces 4 2 Structure of the index family ois ncciscccccacescecediectceclcdsseccctecdeesatecsecesundccestucssnncs under saueaseuecteaueecaucesencatesdeesacuesedceuszees 5 3 LIII ILI 6 3 1 6 3 1 1 List of eligible Dond TYPOS 6 3 1 2 Muro neligiole Dond lier 6 3 22 SOCUMUZALION 6 3 2 1 Eligible securitizatlori types t roten tetuer ceu Hina 6 3 2 2 List of ineligible securitization 22224 1 nnn entente nnne 7 3 3 ISSUCK ONGUM rE A E E A E E E A A A E 7 7 3 5 Bond sizo and currency 01156065 tpe tee rex Der 7 3 6 Markot O ISI M 8 3 7 Availabili2. ACASH Y G Fa PR A P el J i l 6 2 4 Cash payments The total value of cash payments since from the last rebalancing date to date t is calculated as follows CASH Y bi F ja Y PR 5 F a N j l 1 j l 6 2 5 Number of bonds The number of bonds in an index on date t 6 2 6 Month to date return The month to date return is calculated as follows TR TRi s 6 2 7 Year to date return The year to date return is calculated as follows TR TRi y LRi y t TRi y Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide 7 Appendix 7 1 Index ratings mark An average rating is used to determine a bond s index rating Each rating is assigned a number according to the following procedure Where more than one rating is available scores will be added and the sum divided by the number of ratings A non integer result will be rounded to the nearest integer Forexample 4 33 is rounded down to 4 while 4 5 is rounded to 5 The resulting number is converted to the index rating Fitch Standard amp Poor s Index Rating AAA Aaa AAA 1 AAA AA 1 2 2 3 AA AA Aa3 AA 4 AA A A1 A 5 A A A2 A 6 A A A3 A 7 A BBB 1 BBB 8 BBB BBB Baa2 BBB 9 BBB BBB Baa3 BBB 10 BBB BB Bat BB 11 BB
3. BB Ba2 BB 12 BB BB Ba3 BB 13 BB B B1 B 14 B B B2 B 15 B B B3 B 16 B CCC Caa1 CCC 17 CCC Caa2 CCC 18 CCC CCC Caa3 CCC 19 CCC cc Ca cc 20 Below CCC 21 Below D RD D 22 Below CCC Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk 7 2 Definition of the index fields Base asset value value of the pool of assets at reset date Asset Value Based asset value Price index level Cash in interest payment principal payment or interest shortfall principal write down Cash balance sum of the cash in between two reset dates Sector level Asset value cash balance Base asset value Price index level Price of the securities weighting of security in the index Depth number of securities used in the index in term of prices and sector levels Av life Average of the average life of the securities weighting Discount margin Average of the spread of the securities weighting DM WAL Depth number of securities used in the index in term of Av life and Discount margin levels 7T 3 Annotations Loc teats vain Accrued interest of bond i on date t T UE Accrued interest on bond i on rebalancing date t s CASH eee d eds Total cash payments on bond i received since the last rebalancing Total cash payments in the index received since the last rebalancing ACASH Cash payments o
4. Guide ma rk 6 Analytics A number of bond and index analytics are calculated for the index 6 1 Bond analytics 6 1 1 Base market value The base market value denotes the market value of bond i at the last rebalancing The base market value is calculated as follows MV Pirs Airs Fii s Ni t s 6 1 2 Market value The market value of bond i in the index on date t is calculated as follows MV i Piit Ais Fig 6 1 3 New cash payments Coupon payments and redemption payments attributable to bond i today is calculated as follows ACASH i Ps Es PR F 6 1 4 Cash payments Coupon payments and redemption payments attributable to bond i since the last rebalancing is calculated as follows t s lt m lt t 1 8 lt lt 1 j l j l 6 2 Index analytics 6 2 1 Base market value The base market value market value of all bonds in the index at the last rebalancing is calculated as follows n MV t s Piss Alis F i s i 6 2 2 Market value The base market value market value of all bonds in the index at the last rebalancing is calculated as follows Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rk Y Alig Fite Neves i l 6 2 3 New cash payments The total value of cash payments since from the last rebalancing date to date t is calculated as follows
5. for bonds are taken into account on the recorded date When a bond is fully repaid intra month the bond is treated as cash for the remainder of the month The accrued interest up until the redemption date is treated as an unscheduled coupon payment Scheduled paydowns Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk Scheduled redemption payments for bonds are taken into account from the date they occur Bonds that are fully repaid intra month are taken into cash immediately 5 6 2 Reinvestment of coupons and redemption payments Cash received from coupons or redemption payments is held as cash from payment date until index rebalancing at which point it is reinvested in the index Cash does not accrue interest 5 7 Index Restatement Index restatement follows the policy described in the Index restatement policy document available on the Markit iBoxx Rules page of www markit com http www markit com en products data indices bond indices iboxx rules page in the Methodology Documentation section 5 8 Index Review Index methodology reviews for the indices outlined within this guide are performed on an ad hoc basis Any material changes to the methodology governing the indices are published on the Markit website http www markit com product indices Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index
6. of issue Availability of pricing and payment information 3 1 Bond type 3 1 1 List of eligible bond types Floating rate bonds Sinking funds and amortizing bonds Fixed to floater bonds only after the switch to a floating rate coupon Tapissues 3 1 2 List of ineligible bond types Fixed rate bonds Fixed to floater bonds during the fixed coupon period 3 2 Securitization type The list of eligible ABS types is limited to standard ABS type in common in the market Complex structures such as CDOs are not eligible Only ABS issued by Special Purpose Vehicles SPVs are eligible for the index 3 2 1 Eligible securitization types Auto Leases Auto Loans Commercial Mortgage Backed Securities CMBS Residential Mortgage Backed Securities RMBS Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk Buy To Let Residential Mortgage Backed Securities BTL RMBS Prime Residential Mortgage Backed Securities PRMBS Non conforming Residential Mortgage Backed Securities SPRMBS Credit Cards Equipment Leases Insurance Premium Loans Balance sheet collateralized loan obligations Small amp Medium size Enterprises SME Collateralized loan obligations Student loans Trade receivables Whole business securitizations Balance sheet collateralized loan obligations are transactions distinguished by collateral that is orig
7. Granite bonds are calculated for Prime RMBS and the UK Region Country Europe Table 1 ABS sector structure Austria Belgium Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Western Europe Denmark Norway Sweden Switzerland UK Eastern Europe Russia Turkey Ukraine Multi country Copyright 2014 Markit Group Limited All rights reserved www markit com Table 2 ABS geographical breakdown Markit iBoxx European ABS Index Guide Ma rk Table 3 Seniority Breakdown Number Seniority Definition A is normally senior unless specified there is a priority of payment between series of A then we consider Super Senior A is normally senior unless specified there is priority of payment between series of A then we consider Super Senior Non Subordinate B is normally Subordinate unless specified otherwise sometimes Mezzanine Mezzanine M is normally Mezzanine unless specified otherwise sometimes Subordinate p Junior is the last subordinate bond in the capital structure 3 Selection Criteria A number of selection criteria are applied to the outstanding universe of European Asset backed Securities to determine the index constituents list Bondtype Securitization type Issuer origin Credit rating Bond size and currency of issue Market
8. ase Market Valu Em 13 6 1 2 MEI Weal rc 13 6 1 3 New cash PAayMONtS D 13 6 1 4 Green 13 6 2 nein pm Em 13 6 2 1 Market VANO t EE 13 6 2 2 MEDI 13 6 2 3 New cash payments eges epis censes D AUN Eua EE YER RD etx 14 6 2 4 CASI PAYMOMSs ERE 14 6 2 5 Number of bonds EE 14 6 2 6 Month to date go m 14 6 2 7 Em 14 7 PAD DOIN c 15 7 1 IMO X ALIN GS cvsd 15 7 2 Definition of the index fields ciiiucinee ciue einer eie coepere ike ce AESA 16 7 3 ace 16 8 Further neutrum P w 17 9 5 18 Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide Ma rk Changes to the Markit iBoxx European ABS Index 01 Oct 2014 Index restatement complaints sections added 01 Sept 2014 Index review Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk 1 Introduction Markit Indices is the leading global provider of benchmark an
9. ble on the Markit iBoxx Rules page of www markit com http Awww markit com en products data indices bond indices iboxx rules page in the Methodology Documentation section on the right hand side of the page Markit iBoxx European ABS Index Guide ma rk 9 Disclaimer Any information provided in this document is on an as is basis Markit including any of its affiliates makes no warranty expressed or implied as to its accuracy completeness or timeliness or as to the results to be obtained by recipients and shall not in any way be liable to any recipient for any inaccuracies errors or omissions Without limiting the foregoing Markit shall have no liability whatsoever to any recipient whether in contract in tort including negligence under warranty under statute or otherwise in respect of any loss or damage suffered by any recipient as a result of or in connection with any information provided or any course of action determined by it or any third party whether or not based on any information provided The inclusion of a link to an external website by Markit should not be understood to be an endorsement of that website or the site s owners or their products services Markit is not responsible for either the content or output of external websites Opinions statements estimates and projections in this document including other media are solely those of the individual author s at the time of writing They do not necessarily ref
10. d going forward For the avoidance of doubt no information received is applied retroactively this includes pool factors and accrued interest Accrued interest is calculated daily based on the current coupon observed on each bond with respect to its specific day count convention Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk 5 3 FX data Currency conversions for the index are based on WM Reuters 4 pm London FX mid rates versus the USD This rate will be carry forward if not available 5 4 Settlement convention Index calculations are based on t 0 settlement 5 5 Index formulas 5 5 1 Total Return Index Single Currency Market values and cash flows in currencies other than the index currency are translated into the index currency at the applicable daily spot rate The Total Return index is calculated as follows n t s lt mst 1 8 lt lt fe F YG Fija Y PR F ced i j l j l n Pis As F N 1 t s i 5 5 2 Total Return Index Unhegded The Unhedged Total Return indices are calculated as follows 1 8 lt lt 1 n t s lt mst St YG Fija gt PR fF F ya jx N prs j l j l Y Paes Ait FX N i l 14 8 1 1 5 5 6 Treatment of certain intra month events 5 6 1 Treatment of redemption payments Unscheduled paydowns pre payments Unscheduled redemption payments
11. d index services Markit indices cover all asset classes including fixed income credit structured finance equity and environmental In addition to our Markit index families we provide a range of index related services enable our clients to meet their specific custom or bespoke index requirements Our indices are used by investment banks asset managers hedge funds insurance companies for benchmarking risk management valuation and as the basis of a wide range of financial products including exchange traded funds index funds structured products and derivatives Markit is a leading global financial information services company with over 2 000 employees The company provides independent data valuations and trade processing across all asset classes in order to enhance transparency reduce risk and improve operational efficiency Its client base includes the most significant institutional participants in the financial marketplace For more information see www markit com The Markit iBoxx European ABS Index family is designed to measure the performance of EUR GBP and USD denominated asset backed securities originating from Europe The index family allows market participants to benchmark to indices with various asset class rating currency and country of collateral profiles Investors can measure the relative performance of their assets to the overall index or relevant sub index Researchers can gain a better understanding of the returns available fr
12. date the membership list with the final outstanding amounts for each bond will be published On the last business day prior to the rebalancing date Markit publishes the closing prices of all bonds in the final membership list at the close of business Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide ma rk 5 Data and index calculation The index is calculated and published on a daily basis seven days a week including market holidays An index is calculated if there is at least one bond available that matches all inclusion criteria If no more bonds qualify for an index then its level will remain constant If at least one bond becomes available again the index calculation will be resumed from the last calculated level The index history starts on 31 December 2006 at an index level of 100 5 1 ABS bond prices The index calculation is based on bid prices In the event that no bid price is available for a particular date the last available bid price will be carried forward This might be the case in periods of market stress or disruption as well as in illiquid or fragmented markets If the required inputs become impossible to obtain the bond will become ineligible for the index please refer to section 3 7 New bonds enter the index at their respective ask prices Bid price quotes for bonds in the eligible universe are provided by Markit ABS Pricing Service At launch t
13. he market makers providing bond prices to the Markit ABS Pricing Service are Banco Santander Bank of America BNP Paribas Citigroup Deutsche Bank Goldman Sachs JP Morgan Lloyds Morgan Stanley Natixis Nomura Societe Generale Spread and Weighted average life are not used in the calculation of the index but are displayed as additional information Bid spread quotes and weighted average life for bonds in the eligible universe are provided by Markit ABS Pricing Service 5 2 Payment data 5 2 1 Data source Cash flow payment information used for Markit iBoxx ABS indices is provided by Markit s European Reference Cashflow Database ERCD ERCD incorporates validated payment data tranche by tranche directly from investor payment reports Such data is used to track payments and shortfalls of interest and principal as well as writedowns and writedown reimbursements 5 2 2 Treatment of late or corrected payment information Information about principal repayments and interest shortfalls may not be received until after the effective payment date In such instances the index assumes that all interest payments have been made in full and that no principal repayments have been made The pool factor of the bond in the index remains unchanged The information is updated on the first calculation date after the information has become available and the market value cash and accrued interest of the bond in the index is adjuste
14. inated by the same bank that is either selling the collateral into an SPV or buying protection on the collateral 3 2 2 List of ineligible securitization types Oollateralized Debt Obligations CDOs Leveraged collateralized loan obligations 3 3 Issuer origin The originating entity needs to be domiciled in Europe 3 4 Credit rating Bonds must be rated CCC or higher based on an average index rating determined by Markit Please refer to the appendix section 9 1 for details of the average rating calculation Ratings issued by Fitch Moody s and Standard amp Poor s are considered A constituent is removed from the index at the next rebalancing if its average index rating falls below CCC 3 5 Bond size and currency of issue The currency of the bond must be EUR GBP and USD denominated and all payments need to be in the issue currency At inclusion in the index the minimum amount outstanding required for the index differs depending on the rating of the ABS 500m local currency for originally AAA rated securities 30m local currency for securities originally rated AA and lower Bonds will remain in the index until paid down completely regardless of outstanding size so long as each meets all other selection criteria The amortization schedule of ABS lends to having a sometimes large portion of the market having low outstanding balances Markit wishes to keep the index as representative of the market as possible by keeping smal
15. lect the opinions of Markit Neither Markit nor the author s has any obligation to update modify or amend this document or to otherwise notify a recipient thereof in the event that any content information materials opinion statement estimate or projection collectively information changes or subsequently becomes inaccurate Copyright 2011 Markit Group Limited All rights reserved and all intellectual property rights are retained by Markit Any unauthorised use disclosure reproduction or dissemination in full or in part in any media or by any means without the prior written permission of Markit Group Limited is strictly prohibited Copyright 2014 Markit Group Limited All rights reserved www markit com
16. ler bonds in the index noting that bonds are weighted in their respective indices by outstanding size Bonds that had been excluded from index need to fulfil the full amount outstanding criterion in order to qualify for re inclusion Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide Ma rk 3 6 Market of issue Bonds issued via private placements are not eligible for the index Public issues and private placements which have subsequently become publicly traded are eligible for the index 3 7 Availability of pricing Bonds are only eligible for the index if an updated price is available in the period starting from the 7 business day prior to month end to the 3 last business day prior to month end Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rna rk 4 Index rebalancing The index is rebalanced on the last calendar day of each month Rebalancing date The cut off date for meeting the eligibility criteria is 3 business days prior to the rebalancing date Newly issued bonds that have not settled three business days prior to the rebalancing date are only included in the index if a they settle before the rebalancing date and b their rating and outstanding amount are known with certainty 3 business days prior to the rebalancing date c pricing is available 2 business days prior to the rebalancing
17. n bond i received on date t NGAS Alo Cash payments in the index received on date t Redemption adjustment factor for bond date t E M Redemption adjustment factor for bond i on the last calculation date prior to t i Redemption adjustment factor for bond i at the last rebalancing FX poscit eno he FX spot rate on date t FX spot rate at the last rebalancing eee eee Coupon payments received from bond i on date t Month to date return for the Total Return Index y Year to date return for the Total Return Index MV Market value of bond i on date t Market value of bond i at the last rebalancing base market value of bond i NAY sissies P Market value of index on date t Market value of index at the last rebalancing base Market value of index n E Amount issued of bond i at the last rebalancing Clean price of bond i on date t 0 Clean price of bond i at the last rebalancing PRi4 esineisiin Redemption price of redeemed portion of bond i on date t DEDE ees Total value of redemption payments in the index between rebalancing and date t M Redeemed portion of bond i at date j TR hain Total Return Index level on date t TR editi sedis Total Return Index level at the last rebalancing Copyright 2014 Markit Grou
18. om the European ABS market and advisors and fund managers will obtain insight into the relative performance of this assets class against other fixed income markets The Markit iBoxx European ABS Index is calculated by Markit on a daily basis based on prices provided by the Markit European ABS Pricing Service based on contributions from 20 market makers This unique pricing methodology ensures accurate pricing of index constituent securities that is independent of any single broker dealer or pricing source This document contains the selection rules and calculation methodology for the Markit iBoxx European ABS Index Copyright 2014 Markit Group Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide mark 2 Structure of the index family The index family comprises an overall index and sub indices by country ABS sector currency of issue and rating and combinations of the above All indices are calculated in EUR GBP and USD Level 0 Level 1 Level 2 Level 3 Level 4 5 Buy to Let RMBS Non conforming RMBS Prime RMBS MBS RMBS Excluding GRANM GRANM only RMBS CLO SME CLO Equipment Lease ABS Loan Obligations ABS ex MBS Business ABS Trade Receivables WBS Retail ABS Auto Auto Lease Auto Loans Credit Card Student Loans Additional indices covering only bonds issued by Granite and indices excluding
19. p Limited All rights reserved www markit com Markit iBoxx European ABS Index Guide rk 8 Further Information For more information on the products and services from Markit please contact us at sales markit com or call one of our regional offices New York 1 212 931 4900 Dallas 1 972 560 4420 London 44 20 7260 2000 Amsterdam 31 20 502 5800 Frankfurt 49 69 299 868 140 Singapore 65 6499 0088 Sydney 61 2 0 89 89 80 Tokyo 81 3 6402 0130 Copyright 2014 Markit Group Limited All rights reserved www markit com For technical issues please contact us at iBoxx markit com or euroabspricing markit com Formal complaints can be sent electronically to a specifically dedicated email address complaints indices markit com Please note complaints _indices markit com should only be used to log formal complaints For any general index enquiries please contact Markit iBoxx indices support group iBoxx markit com Licences and Data iBoxx is a registered trademark of Markit Indices Limited Markit Indices Limited owns all iBoxx data database rights indices and all intellectual property rights therein A licence is required from Markit Indices Limited to create and or distribute any product that uses is based upon or refers to any iBoxx index or iBoxx data Ownership Markit Indices Limited is a wholly owned subsidiary of Markit Group www markit com Glossary of key terms is available in the Glossary document availa
20. ty of pricing ettet rtr terr eet ecce ee ere Decr ea 8 4 Ind x rebalancing mE 9 5 Data and index 10 5 1 ABS IDOI Benito OEC 10 5 2 Vine 10 5 2 1 56066 10 5 2 2 Treatment of late or corrected payment nn 10 5 3 uS rice 11 5 4 Settlement convention eene ennt nitent enn sr ns intet eite sedis sinn nennt 11 5 5 neam 11 5 5 1 Total Return Index Single Currency sssssssssssesseseeeeennee nennen nennen nnns nen 11 5 5 2 Total Return Index 222 eene eren nennen nnns rnnt renes nnne 11 5 6 Treatment of certain intra month 11 5 6 1 Treatment of redemption 11 5 6 2 Reinvestment of coupons and redemption payments sss emnes 12 5 7 Index Restaltetmieht ni 12 5 8 ledig 12 6 Analytics sir ee D eo D IL 13 6 1 neruis w 13 6 1 1 B
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