KOSDAQ 150

Methodology Guide

November 2020

As the material is prepared solely for informational purposes, KRX is not

responsible for any results from investment or loss caused by the use of
the contents. The material can be modified without a notice and cannot be
reproduced, copied, transferred, published or distributed without permission
of KRX in advance.
 < Index History >
Date History
ㅇ Changing sector classification and constituent selection methods
- (Before) Companies in each of the non-technology sectors are
selected first for index inclusion, followed by any technology
December sectors
11, 2019 - (After) In each sector, companies that meet the criteria are
selected for index inclusion. Sector classification is based on
11 sectors of the Global Industry Classification Standard (the
financials sector included)

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 1. Overview

1.1 The Guide describes requirements for calculation and management

of the KOSDAQ 150 administered by the Korea Exchange
(hereinafter referred to as “KRX”).
1.2 The Guide is to be read in conjunction with the Basic Methodology
Guide for KRX Equity Indices.
1.3 First introduced in July 2015 to represent the KOSDAQ market, the
KOSDAQ 150 Index is currently used as an underlying index for
financial instruments such as futures and ETFs. In order for the
index to accurately reflect the KOSDAQ market, the Guide defines
constituent selection criteria and how to calculate the index level,
considering the index representativeness, liquidity, and marketability.

2. Management Responsibility

2.1 (Administrator) As an index administrator, KRX takes charge of

calculating and managing the KOSDAQ 150 including;
- Addition and removal of constituents;
- Change of weights of constituents in accordance with the
methodology;
- Periodic review and application of any follow-up changes to the
index; and
- Distribution of index values.
2.2 (Periodic review of methodology) KRX periodically reviews the
Guide to make sure that the methodology is in line with the index
objective while meeting the needs of stakeholders. Such review is
examined by the Index Committee.
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 3. Methodology Change and Exception

3.1 Any material changes to the Guide are confirmed after the Index
Committee’s review. In the process, various comments and
suggestions from stakeholders and subscribers are thoroughly
considered. Material changes include;
- Changes in the index concept or objective;
- Revision of the Guide that may result in material rebalancing;
and
- Revision of the Guide that may influence the index’s properties
including returns rates and volatility.
3.2 When a corporate action not indicated in the Guide is to be applied
to the index or when an event is to be applied to the index
differently from the Guide, the Index Committee or Index
Management Committee reviews the case before confirmation. When
needed, comments are collected from external experts, market
participants, and stakeholders to be accepted.

4. KRX Index Policy and Guidelines

ㅇ This Guide is to be read in conjunction with the following

documents.
4.1 General information on equity index calculation
ㅇ Refer to the Basic Methodology Guide for KRX Equity Indices.
4.2 How to apply corporate actions to indices
ㅇ Refer to the Corporate Actions and Events Methodology.

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4.3 Index correction
ㅇ Refer to the Guideline for Corrections to Indices.
4.4 Index decommission, transfer, or index calculation during market
suspension
ㅇ Refer to the Guideline for Index Decommissions.
4.5 Complaints on index calculation and their management
ㅇ Refer to the Guideline on Complaints.
4.6 Comments for index methodology
ㅇ Refer to the Guideline for Public Comments.
5. Expert Judgement

5.1 The Guide is designed to objectively suggest what is required to

calculate and manage the KOSDAQ 150 and thereby to avoid
subjective, arbitrary judgements to the extent possible.
5.2 As KRX equity indices are automatically calculated and published
based on prices formed in the KRX markets and each constituent
company’s listed share number, KRX does not make a separate
expert judgement regarding input data. However, there may arise a
very unique and complicated circumstance which is difficult to be
solely controlled by the Guide.
5.3 In such case, KRX seeks to address the issue through discussion
with the Index Committee or the Index Management Committee.
Comments from stakeholders may be accepted, if necessary. In an
urgent circumstance, the issue can be handled following Section 4 of
this document to the extent possible.
5.4 KRX makes available on the KRX index website any exercise of
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 Expert Judgement along with its background.
5.5 All the details of any exercise of Expert Judgement are permanently
stored electronically.

6. Constituent Selection Method

6.1 Eligibility Criteria

ㅇ Eligible securities for the KOSDAQ 150 are the common stocks
listed on the KOSDAQ market as of the final trading day in the
second month preceding rebalancings (hereinafter the “screening
base date”), excluding:
- companies on the KRX’s watchlist or scheduled to be delisted;
- companies designated as prudence-required stock;
- collective investment institutions or foreign securities;
- companies investing in real estate, ship, or social infrastructure,
mutual funds (MFs), or special purpose acquisition companies
(SPACs);
- issues whose free-float rate is under 10%; and
- companies listed on the KOSDAQ market for six months or less
6.1.2 Other companies deemed disqualified may be subject to exclusion.
6.2 Sector Classification

ㅇ Eligible securities are classified into one of the 11 sectors below in

accordance with the Global Industry Classification Standard*.
* Global Industry Classification Standard: A global standard to classify equities
into sectors, jointly developed by MSCI and S&P. (Visit
http://us.spindices.com for details.)

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 1. Information Technology 2. Health Care 3. Communication Services
4. Materials 5. Industrials 6. Customer Staples
7. Customer Discretionary 8. Financials 9. Energy
10. Utilities 11. Real Estate

ㅇ A sector is excluded from the index when the market capitalization

of all companies in the sector is less than 1% of the market
capitalization of all eligible securities.
ㅇ Sector classification is the screening base date basis.
6.3 Screening

ㅇ (Screening criteria) Screening for index inclusion is based on the

average daily market capitalization and the average daily trading
value of an eligible company.
ㅇ (Screening period) Companies are screened over the six months
preceding the screening base date.
In cases where a merger (excluding small scale mergers) or a spin
off takes place after the first trading day of the screening period,
the time between the screening base date and the day of listing
resulted from a respective corporate action is deemed as the
screening period. If such period is less than 30 trading days, 30
trading days preceding the screening base date are considered as
the screening period and the given corporate action is deemed to
occur on the first trading day of the period.
6.4 Constituent selection

In each sector, a company that satisfies the criteria

6.4.1 (First selection)
of market capitalization and trading value is selected for index
inclusion.
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 ㅇ In each sector, companies are selected in order by average daily
market capitalization. Companies in 60% by cumulative market
capitalization in a given sector, including the first company that
crosses the 60% mark, are selected.
ㅇ In each sector, companies that ranked in the bottom 20% by
average daily trading value (liquidity basis) are excluded.
6.4.2 (Second selection) Companies selected in the first selection go
through the following steps to be confirmed as a constituent.
ㅇ A current constituent company is re-selected as long as it meets the
liquidity requirement and its average daily market capitalization
ranking is within 120% of the number of current constituent
companies in its sector.
ㅇ A new company is selected if its average daily market
capitalization ranking is within 80% of the number of current
constituent companies in its sector.
ㅇ If the 150 company target count has not been reached so far,
current constituent companies that were not re-selected for index
inclusion while meeting the liquidity requirement are selected in
order by market capitalization. Reversely, if more than 150
companies have been selected, companies are excluded in ascending
order of market capitalization.
6.4.3 (Exceptional addition of large-scale companies) A company that
fails to meet the constituent selection criteria but is in the top 50
common stocks in the KOSDAQ market by market capitalization,
is subject to index inclusion considering sectoral balance and
liquidity. In such case, the company replaces a company with the
smallest market capitalization among the selected companies. The
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 market capitalization refers to the average daily market
capitalization for 15 trading days from the screening base date.
6.4.4 (Removal of small-cap stocks) An eligible security can be
removed from the index when its average daily market
capitalization ranked below 300th among common shares in the
KOSDAQ market. In such case, the removed company is replaced
with a company that has the largest market capitalization among
eligible securities that satisfy the liquidity requirement.
6.5 Selection of reserved issues

ㅇ Among eligible securities that are not selected for index inclusion
but satisfy the liquidity requirement in each sector, five or less
companies are chosen as reserved issues in order by average daily
market capitalization.

7. Rebalancing

7.1 The KOSDAQ 150 is biannually reconstituted using the constituent

selection criteria. Rebalancing takes place on the trading day
following the last trading day of the June and December delivery
month for KOSDAQ 150 futures contracts.
7.2 Selected companies are confirmed as constituents in May and
December after the Index Committee’s review before being
published on the KRX index website (http://index.krx.co.kr).

8. Other Maintenance

8.1 (Disqualification) Constituents involved in any of the following

causes for disqualification are removed from the index. The
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 removed company is replaced with the top reserved issue in a
given sector. When a constituent company to be removed remains
suspended on the 15th trading day after a respective cause for
disqualification occurred, the company is removed on the 16th
trading day.
Such removal may take place on different schedule, when
necessary, for example, for the convenience of index users. When
removal takes place within a month or less away from index
rebalancing, the removed constituent company may not be
immediately replaced with a reserved issue.
8.1.1 (Delisting)A constituent company is removed on the third trading
day after it is determined to be delisted. If the company is to be
removed due to a merger, a full stock exchange, or a transfer, it
is removed on the day of its suspension.
In the case of delisting of a constituent to be listed on the
KOSDAQ market, the constituent is removed on the day it is
delisted.
8.1.2 (Watchlist)A constituent company is removed on the third trading
day after the company is put on the KRX’s watchlist.
A constituent company is removed on
8.1.3 (Prudence-required stock)
the third trading day after the company is designated as
prudence-required stock.
8.1.3 (Others) A constituent considered disqualified for reasons other
than those above is removed on a day set by KRX.
8.2 (Merger and acquisition) Identical to that of the KOSDAQ 150.
* Please refer to the KOSDAQ 150 Methodology Guide.

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8.3 (Spin off)In the case of a current constituent company’s spin off,
only the parent company remains in the index, not the spin-off
company.

9. Calculation

9.1 Formula

ㅇ The formula to calculate the KOSDAQ 150 Index is as follows

 
    × 
  

where the multiplier is the base value of 1000 and the base date is
4 January 2010.
ㅇ The definitions of the current market capitalization, index share,
and stock price are identical to those of the KOSPI 200 and most
KRX indices.
* Please refer to the Basic Methodology Guide for KRX Equity
Indices and the KOSPI 200 Methodology Guide.
9.2 Free-float shares

ㅇ The KOSDAQ 150 is a float-adjusted market-cap weighted measure

of its constituents. Please refer to the Basic Methodology Guide for
KRX Equity Index for more details.
9.3 Weight Capping

ㅇ KOSDAQ 150 constituent companies are not capped.

9.4 Calculation time and interval

ㅇ The KOSDAQ 150 is calculated from 09:00:10 AM to 15:30:00 PM.

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 When the closing price of any of the constituents is not confirmed
by 15:30, the calculation continues until all closing prices are
confirmed. When the market trading hours change, the index
calculation time change accordingly; from the beginning to end of
trading.
ㅇ The KOSDAQ 150 is calculated every second.
10. Governance

10.1 Index Committee

ㅇ KRX has put in place the Index Committee to manage KRX indices
in an impartial and objective manner. The Committee, mostly
consisting of experts from outside of KRX, reviews how key indices
are managed.
10.2 Index Management Committee

ㅇ KRX runs the Index Management Committee, consisting of KRX

staff who have expertise in indices, to manage indices other than
key indices and to review the application of a corporate action to
KRX indices.
<Note> Index Distribution

ㅇ KOSDAQ 150 Index values and constituent information are

provided as paper or electronic copies via the KRX index website
(http://index.krx.co.kr), its major vendors, and other media. The
information is created in the KRX Information Distribution System
and disseminated through various channels including securities
networks and the File Transfer Protocol (FTP).

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ㅇ Users can subscribe to the KRX index data products to receive
detailed information of the index such as constituent companies’
index share, free-float ratio, capping ratio.
ㅇ The index’s Bloomberg ticker is as follows.
Index Bloomberg Ticker
KOSDAQ 150 Index KOSDAQ150

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