A three-year-old overhaul of the DAX index suite will mark a new chapter in the first quarter of 2024, when methodology changes for the indices will come into effect.
As of Monday, March 18, 2024, the DAX Equity Indices[1] will adopt new rules, mainly related to the treatment of corporate actions. Among other changes, the indices‘ calculation formula will also be revised, and the weight cap on constituents will be raised.
The biggest rules reform since the inception of DAX in 1988 was designed to bolster the quality of member companies and bring selection criteria in line with international standards, ensuring the indices remain fit for purpose in a changing financial landscape. This sustained evolution also saw the flagship DAX benchmark grow from 30 to 40 constituents in 2021. The new treatment of corporate actions will further benefit users by facilitating and lowering the cost of index replication.
Methodology and calculation changes
As of March 2024, the DAX Equity Indices will be calculated under the STOXX calculation framework, triggering changes to the treatment of corporate actions.
In the most significant change, dividends will now be reinvested in the whole index portfolio rather than in the distributing stock. There will also be changes to the treatment of shares that are subject to a tender offer, benefiting investors with a clearer process timeline that makes the index more predictable. Further changes will be implemented to the determination of stocks’ free floats, as well as the threshold for extraordinary free float adjustments.
Additionally, the index calculation formula will move from a so-called correction factor-based methodology to a divisor-based scheme. Consequently, changes in the number of shares due to corporate actions will be reflected immediately rather than carried over to the next regular index review.
For a detailed list and explanation of all rules and calculations changes, please click on the documents below:
- Overview of Methodology Changes
- DAX Equity Index Methodology
- DAX Equity Index Methodology Changes
- DAX Equity Index Calculation Guide
- DAX Equity Index Calculation Changes
Data system migration: standardization and accessibility
Another key change in the DAX world will also take place next March, when the distribution of data for DAX Equity Indices will migrate to the system currently used by STOXX indices. This will ensure a better operational experience for subscribers of both DAX and STOXX data, offering single-point access to reports that are aligned in structure and content. STOXX constantly upgrades its platforms to match markets’ and clients’ demand for integrity, governance, surveillance and stability.
To create a smooth transition and help DAX index licensees familiarize themselves with the new Index Data Distribution System, STOXX will run a simulation phase between December 18, 2023, and February 29, 2024, during when it will release daily DAX data reports on the new system alongside the existing one (MD+S).
Only test data will be released over the new distribution system during the simulation period. Real data will remain available only on the incumbent system until the end of February.
Further information on the new distribution system and files format is available in the following documents:
- Overview of technical migration, and file name and format change
- DAX Equity Indices Simulation Phase Announcement
- Index Files Guide
Ongoing evolution
The work to modernize the DAX indices isn’t over, as STOXX continues to meet investors’ progressing needs and demands. Following a market consultation, STOXX announced on November 22 that the DAX indices’ weight cap for individual constituents will be raised from 10% to 15% as of March 2024, reflecting “a wide range of considerations from different stakeholders” and aligning the index with international practices.
[1] For a complete list of impacted indices, please click here.