S&P Dow Jones Indices announced Friday that it is loosening the eligibility criteria for the S&P/TSX family of indexes, opening the door for companies incorporated or domiciled outside Canada to be included as long as they maintain a meaningful presence or economic exposure to the country.
Under the revised methodology, any company listed on the Toronto Stock Exchange can qualify for inclusion in S&P/TSX indexes as a “foreign issuer,” regardless of where it is legally based, provided it also satisfies other standard requirements such as minimum size and liquidity thresholds. The S&P/TSX indexes affected include the broad S&P/TSX Composite as well as the S&P/TSX 60, which tracks Canada’s largest publicly traded companies.
Previously, companies were required to be domiciled or incorporated in Canada to be included in these indexes. That requirement is being dropped as part of the update.
S&P Dow Jones Indices had also considered applying a “foreign issuer factor” that would have counted foreign issuers at only 50 per cent of their market value within the indexes. That proposal was scrapped following feedback from the market, according to the index provider’s statement. Instead, foreign issuers will be included at their full float-adjusted market capitalization, the same standard applied to other constituents.
The new rules are set to take effect alongside the December 2026 quarterly rebalancing of the S&P/TSX indexes, with changes applying before markets open on Dec. 21. S&P Dow Jones Indices said it will review the eligibility of foreign issuers annually each September, as well as on an as-needed basis, such as following the completion of a cross-border merger.
The rule change carries direct implications for Vancouver-based Teck Resources Ltd., which agreed last September to be acquired by Britain’s Anglo American PLC. Under the previous eligibility standards, the merged entity risked being dropped from the TSX Composite and TSX 60 because it would no longer be domiciled in Canada. With the new methodology, Teck is set to remain part of both indexes following the merger.
The Teck-Anglo American deal has already secured approval from shareholders of both companies as well as from the Canadian federal government. However, Reuters reported this week that the transaction is still awaiting regulatory approval from Chinese authorities.
Inclusion in major stock indexes can have a notable impact on share prices because of the scale of passive investing. Fund managers who track a given index are required to hold shares of the companies within it, meaning stocks added to an index can see increased demand and price movement both before and after their inclusion takes effect. Conversely, companies removed from an index can lose that same source of demand.
Separately, as part of its most recent quarterly rebalancing announced last week, S&P Dow Jones Indices said it will add Snowline Gold Corp. to the S&P/TSX Composite index before markets open on Sept. 21.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
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