Standard & Poor�s announced that it has decided not to change the current schedule for including income trusts in the S&P/TSX Composite Index. No surprise there. 

In a press release, the company said that, on September 27, the S&P/TSX Canadian Index Committee “invited comments from the S&P/TSX Canadian Index Advisory Panel and other members of the financial community on whether the announced schedule for including income trusts in the S&P/TSX Composite Index should be revised in light of possible changes to regulations governing income trusts.”

With nearly three dozen responses from a range of financial market participants, review of the comments and consideration of related financial market factors, the Committee apparently decided “not to change the current schedule for the inclusion of income trusts.”

As we have reported here, before, the schedule involves income trusts being added to the S&P/TSX Composite Index in two steps, after the close of market on Dec. 16, 2005 this year and March 17 next year. However, a new equity-only composite index (S&P/TSX Equity Index—i.e. the traditional version of the index) will be also be calculated and published beginning in December 2005. Income Trusts will not be added to the S&P/TSX 60 Index.

This is little surprise to many.  It represents the sellers’ desire, including large fund managers’ desire, to maintain the market-driven index as a way to coordinate and benchmark their perspective on and performance against a market. Effective selling is the priority.

The S&P news of carrying on as planned—despite potential change in government policy or taxation regarding trusts—reinforces a general sense that confidence in the market.  S&P indices feed market tradition on the premise that S&P information supports investor confidence.

No doubt, investors can applaud the S&P for offering information and, in the wisdom of its TSX committee, to include issues in its composite measures because those issues represent approximately 18% of the overall market valuation.

The S&P index would have lost credibility if it had failed to follow-through on its original plans and reflect the scope of the market in its composite index.