Industry Updates

MSCI defers changes to Russian securities as FTSE Russell reviews latest sanctions

MSCI will apply “special treatment” to Russian securities

Theo Andrew

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MSCI will not implement planned changes for Russian securities following US sanctions targeting Russia while FTSE Russell said it is reviewing the impact the latest UK sanctions will have on its indices.

In an announcement on 24 February, MSCI said it will apply “special treatment” for Russian securities and that it would not implement previously announced changes regarding the number of shares for three securities in the MSCI Russia Investable Market index.

The world’s largest index provider added it is freezing non-market capitalisation weighted and custom indices – such as factor, ESG, thematic and capped indices – for any security classified in Russia.

As a result, there will be no additions, deletions or constraint factor changes to the indices.

The changes are set to affect several Russian ETFs with BlackRock, DWS, HSBC Asset Management and Amundi all tracking Russian-focused MSCI indices.

Elsewhere, FTSE Russell said it would provide an update on what the latest round of sanctions issued by the UK mean for its indices in due course.

It follows an announcement by the index provider on Thursday following the first set of sanctions which said that none of the current index constituents of the FTSE Russell Equity indices fall within the scope of the sanctions.

Both MCSI and FTSE Russell said they would welcome feedback from index users and stakeholders as they continue to monitor the situation.

Global sanctions imposed on Russia escalated over the weekend as Western governments rallied to inflict further pain on the Russian economy following its decision to invade Ukraine last Thursday.

In one of the most significant moves yet, Russian banks have been shut out of international payment system Swift and the Russian central bank from international payment operations in a move that could potentially spark a run on Russian banks.

FTSE Russell already imposes capital raising restrictions on several Russian securities, including VTB Bank, Sberbank and Rosneft.

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