Wrap Text
Market Consultation – 20210713 Market Consultation Naspers Prosus Capping
Market Consultation: Request for Comment: Naspers/Prosus Capping
FTSE/JSE Africa Index Series
29 June 2021
1. Introduction
Following the September 2019 FTSE/JSE Index Series implementation of the Naspers capitalisation issue a market
consultation was published to gain insights on how to address the resultant combined weight of Naspers and
Prosus in the FTSE/JSE Capped indices, specifically the Capped SWIX All Share Index (J433). Following the feedback
received from this market consultation FTSE/JSE announced that the proposed amendment to the capping rules
would not be implemented at that stage. Further to that announcement, some market participants have
challenged the validity of the process that was followed in coming to this decision, and other participants and
industry bodies have submitted new motivation to FTSE/JSE to review the decision.
As such, FTSE/JSE is requesting comment from index users on whether the current capping methodology requires
amendment. In particular, index users have suggested that the FTSE/JSE Capped SWIX All Share Index, as the de
facto benchmark for local active South African equity managers, is no longer optimal for its intended purpose, and
could be considered for a targeted rules enhancement.
2. Proposed Capping Amendment
Capping is applied in certain FTSE/JSE indices to reduce single stock exposure. Since Naspers and Prosus are two
separate companies, the capping is currently applied separately, and as such the combined index weight of the
two companies can be as much as 20% in a 10% capped index. However, Naspers derives a dominant portion of
its value from its underlying holding in Prosus, and many index users believe that the principle of the capping
approach should result in the combined group weight being restricted to 10% in the capped indices.
The 2019 proposal document suggested that two separate companies in a capped index that had a group structure
relationship should be jointly capped if the valuation of the parent/holding company was dominated by the
valuation of its stake in the second company. The proposed wording of the rule is as follows:
Page 1 of 3
The following example was provided:
Two important supporting notes to this proposal are:
• Both companies must be JSE listed and All Share constituents
• The valuation of the parent company market capitalisation and its stake in the subsidiary will be based
on public JSE closing prices
The general principle in this instance would be to consider a holding company whose valuation is almost
exclusively dominated by its holding in a listed subsidiary. Where an index constituent has a controlling stake in
another index constituent, and the market value of that stake is greater than 75% of the prevailing market
capitalisation of the subsidiary company, then the two companies shall be considered at a combined group
valuation level for index capping purposes only.
3. Information Required
In order to effectively understand the context of each respondent, and to more effectively analyse contrasting
views to this request for comment, please provide the following supporting information with your response:
3.1 Name of company.
3.2 Name, surname and designation of respondent.
3.3 Do you currently subscribe to receive FTSE/JSE Capped SWIX All Share (J433) and FTSE/JSE Capped SWIX Top 40
(J430) index data? Alternatively, do you have an active tracking license, structured product license or multi-use
license for one of these indices?
3.4 Please briefly describe how you currently utilise the Capped SWIX indices data, both All Share and Top 40 variants.
3.5 What is your company’s current Assets Under Management or Assets Under Advisement that are benchmarked
against the FTSE/JSE Capped SWIX All Share index? Ideally, please provide a split of institutional vs. unit trust.
3.6 What is your company’s current passive tracking AUM against the FTSE/JSE Capped SWIX All Share or Top 40
index?
3.7 Does your company utilise the FTSE/JSE Capped SWIX All Share index in any other manner, e.g., employee scheme,
OTC derivative or other instrument?
Page 2 of 3
4. Feedback Required
Following the 2019 consultation and various bilateral discussions, FTSE/JSE believes that many of the arguments
in support and against the proposal have been well understood. Respondents that have previously provided
qualitative support for their views are not required to provide the same information again in response to this
consultation. We would nonetheless invite any qualitative submissions or comments from respondents in support
of their views.
When responding to this consultation, please provide feedback to the questions listed below. For the purposes
of the questions below, the term “Group Entity Capping” refers to the proposed capping amendment detailed in
paragraph 2 above.
4.1 Do you believe that Group Entity Capping should be applied in the FTSE/JSE Capped SWIX indices (J433 and J430)?
4.2 Do you believe that Group Entity Capping should be applied in all FTSE/JSE Capped indices?
4.3 If Group Entity Capping is not applied, should the standard capping level of 10% in FTSE/JSE indices be reduced to
a lower level? If so, what is the appropriate capping level?
5. Responding to the Consultation
It is important to FTSE/JSE to be aware of the impact to clients as well as any unintended consequences of the
weighting concentration of Naspers and Prosus in the FTSE/JSE Index Series. FTSE/JSE is committed to providing
market benchmarks that are credible and consistent, and the purpose of this market consultation is to obtain
feedback from index users regarding their concerns around the proposed solution.
Please provide us with your response to the questions in the consultation, as well as any additional supporting
information, by Tuesday, 13 July 2021 at the following email address: indices@jse.co.za
When determining the timeline for the implementation of any decision, FTSE/JSE is mindful of the broad usage of
these indices in the market and the need to provide appropriate notice. This document is not confidential and
should be distributed as widely as possible to all stakeholders.
Page 3 of 3
Date: 29-06-2021 05:00:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
