supranational organisations responsible for producing fundamental data on commodity markets (in particular world production quantities used for index weightings). Fixed income indices differ in that no single price discovery process exists. As fixed income instruments trade over-the-counter (“OTC”), the same bond can therefore have different prices in different index providers’ indices. In addition, some fixed income instruments can trade very infrequently or by appointment only. In such cases, indicative or model derived prices may be used in the relevant indices. For further information please to our response to Question 8. (7) What factors do you consider to be the most important in choosing a reliable benchmark? Could you provide examples of benchmarks which incorporate these factors? It should be noted that BlackRock cannot guarantee that a chosen benchmark will be appropriate for a given investor and cannot guarantee the quality or accuracy of a benchmark (including whether such benchmark is reliable). That said, BlackRock employs certain techniques and takes into account certain considerations to help identify benchmarks which may be appropriate for the relevant objective. At the most simplistic BlackRock undertakes commercially reasonable endeavours to determine whether a benchmark is representative, can be replicated, measured, has appropriate transparency and governance and is sufficiently liquid. For rate benchmarks, such as LIBOR, the single most important precondition for adoption by the market is liquidity. For our index businesses, we use commercially reasonable endeavours to determine the efficacy of a benchmark by considering its performance against a number of key criteria. If a benchmark does not meet these criteria, it will struggle to gain acceptance in the market. The key questions we ask are: Is the benchmark representative of the target opportunity set? Is the benchmark sufficiently diversified and reflective of the country/region/sector that is the target of a client’s equity investment? Is the benchmark constructed using market capitalisation weights or an alternative methodology? We further test potential indices against the following questions before determining whether they may be acceptable for use. Are real life investment constraints incorporated into the calculation of the benchmark to make it investable? Are foreign investor limits incorporated into the free float calculation of a stock? Are strategic holdings incorporated into the free calculation of a stock? Are market liquidity screens incorporated? Can foreign investors gain access to an equity market? Are the rules governing index calculation sufficiently transparent? Are the index calculations clear and replicable?
supranational organisations responsible for producing fundamental data on commodity markets (in particular world production quantities used for index weightings). Fixed income indices differ in that no single price discovery process exists. As fixed income instruments trade over-the-counter (“OTC”), the same bond can therefore have different prices in different index providers’ indices. In addition, some fixed income instruments can trade very infrequently or by appointment only. In such cases, indicative or model derived prices may be used in the relevant indices. For further information please to our response to Question 8. (7) What factors do you consider to be the most important in choosing a reliable benchmark? Could you provide examples of benchmarks which incorporate these factors? It should be noted that BlackRock cannot guarantee that a chosen benchmark will be appropriate for a given investor and cannot guarantee the quality or accuracy of a benchmark (including whether such benchmark is reliable). That said, BlackRock employs certain techniques and takes into account certain considerations to help identify benchmarks which may be appropriate for the relevant objective. At the most simplistic BlackRock undertakes commercially reasonable endeavours to determine whether a benchmark is representative, can be replicated, measured, has appropriate transparency and governance and is sufficiently liquid. For rate benchmarks, such as LIBOR, the single most important precondition for adoption by the market is liquidity. For our index businesses, we use commercially reasonable endeavours to determine the efficacy of a benchmark by considering its performance against a number of key criteria. If a benchmark does not meet these criteria, it will struggle to gain acceptance in the market. The key questions we ask are: Is the benchmark representative of the target opportunity set? Is the benchmark sufficiently diversified and reflective of the country/region/sector that is the target of a client’s equity investment? Is the benchmark constructed using market capitalisation weights or an alternative methodology? We further test potential indices against the following questions before determining whether they may be acceptable for use. Are real life investment constraints incorporated into the calculation of the benchmark to make it investable? Are foreign investor limits incorporated into the free float calculation of a stock? Are strategic holdings incorporated into the free calculation of a stock? Are market liquidity screens incorporated? Can foreign investors gain access to an equity market? Are the rules governing index calculation sufficiently transparent? Are the index calculations clear and replicable?
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