Markit iTraxx® Europe

Index Rules

August 2018
Contents
Index Overview ...................................................................................................................................... 3
Markit iTraxx European Indices Administrator ........................................................................................ 3
Roll Dates ................................................................................................................................................ 3
Rule Revision .......................................................................................................................................... 3
Maturity.................................................................................................................................................... 3
Weighting ................................................................................................................................................ 4
Relevant Rating ....................................................................................................................................... 4
Exchange Rates ...................................................................................................................................... 4
Markit iTraxx Europe ............................................................................................................................. 5
Markit iTraxx Europe Liquidity List .......................................................................................................... 5
Markit iTraxx Europe General Criteria .................................................................................................... 6
Creation of the New Markit iTraxx Europe Index Series ......................................................................... 7
Publication of Provisional Markit iTraxx Europe Index ............................................................................ 7
Markit iTraxx Crossover ....................................................................................................................... 8
Markit iTraxx Crossover Liquidity List ..................................................................................................... 8
Markit iTraxx Crossover General Criteria ................................................................................................ 9
Markit iTraxx Crossover Supplementary List ........................................................................................ 10
Creation of the Markit iTraxx Crossover Supplementary List ....................................................... 10
Ranking of the Crossover Supplementary List ............................................................................. 12
Selecting an Entity within a Ticker................................................................................................ 12
Debt Tier Classification ................................................................................................................ 12
Creation of the New Markit iTraxx Crossover Index Series .................................................................. 12
Publication of Provisional Markit iTraxx Crossover Index ............................................................. 12
Markit iTraxx Europe & iTraxx Crossover Indices ........................................................................... 13
Final Review of Constituent List ....................................................................................................... 13
Publication of Annex .......................................................................................................................... 13
Coupon & Recovery Rates ................................................................................................................. 13
Disclaimer ............................................................................................................................................ 14
Further information ............................................................................................................................. 14

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Index Overview
Markit iTraxx European Indices Administrator
Markit Indices Limited is the administrator of the Markit iTraxx Europe and Markit iTraxx Crossover
indices and all related Sub-Indices. The composition of these indices is determined by the
Administrator in accordance with the rules and methodologies set forth in this document (the “Rules”).

The Administrator has sole responsibility to interpret the Rules.

The Administrator shall make determinations and perform all actions regarding the indices pursuant to
the Rules except as follows:

Upon the occurrence of an event that the Administrator determines materially impacts the integrity of
one or more types of Markit iTraxx Europe or iTraxx Crossover Index-related transactions, including
but not limited to trading interruptions; market instability; and/or force majeure events, the
Administrator, acting in a commercially reasonably manner, may at its sole discretion determine that it
is appropriate to depart from the methodologies, timelines and/or procedures set forth in the Rules in
order to obtain a result that preserves the economic intent of such iTraxx Europe or iTraxx Crossover
indices. Where the best course of action is not clear Markit will consult the Index Advisory Committee
for guidance prior to making any such determination. The determined course of action will be
documented, communicated to all stakeholders and published on the Markit website
www.markit.com/Product/Indices under the iTraxx News page.

In the event that any critical input required in the construction of a new series of the index is not
available, Markit will confer with the Index Advisory Committee and publish the outcome of any
material change as well as any decisions taken at Markit’s discretion that have led to a methodology
change.

Roll Dates
’
Each of Markit iTraxx Europe, Markit iTraxx Crossover and all related Sub-Indices will begin on
September 20 and March 20 (or the Business Day immediately thereafter in the event that either such
date is not a Business Day) of each calendar year (each such date, a “Roll Date”).

All references to “Business Days” in this document mean days on which commercial banks and
foreign exchange markets settle payments and are open for general business (including dealings in
foreign exchange and foreign currency deposits) in London, England. All times referred to in this
document refer to local time in London, England.

Rule Revision
The rules for the index are reviewed semi-annually prior to the index roll. Decisions made following an
index rule review will be communicated to stakeholders via e-mail and published on the Markit
website. The publication will contain an overview and timelines for implementation of such rules
changes.

Maturity
The composition of each series of the Markit iTraxx Europe, Markit iTraxx Crossover and Sub-Indices
is the same for all maturities for which a fixed rate is published.

For Markit iTraxx Europe and Markit iTraxx Crossover:

 Each Index that has a Roll Date of September 20 shall be issued with the maturity date of
December 20 occurring 3 years, 5 years, 7 years and 10 years following the Roll Date.
 Each Index that has a Roll Date of March 20 shall be issued with the maturity date of June 20
occurring 3 years, 5 years, 7 years and 10 years following the Roll Date.

For Markit iTraxx Senior and Markit iTraxx Subordinated Financials and Markit iTraxx Non-Financials:

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  Each Index that has a Roll Date of September 20 shall be issued with the maturity date of
December 20 occurring 5 years and 10 years following the Roll Date.
 Each Index that has a Roll Date of March 20 shall be issued with the maturity date of June 20
occurring 5 years and 10 years following the Roll Date.

Weighting
Each entity in Markit iTraxx Europe, Markit iTraxx Crossover and all related Sub-Indices will have
equal or approximately equal weightings. The weighting of each entity will be equal to (i) one divided
by (ii) the number of entities in such index, expressed as a percentage with three decimal places
(e.g., 3.226%). In the case where rounding is necessary to express the weightings in this manner, the
entities shall be arranged in alphabetical order, with the weightings of the entities at the top of the list
being rounded up to the nearest one-thousandth of a percent and the weightings of the entities at the
bottom of the list being rounded down to the nearest one-thousandth of a percent until the weightings
of all entities have been rounded and the aggregate of the weightings equals exactly 100%.

Relevant Rating
The Relevant Rating of each entity will be considered when determining the inclusion or exclusion of
constituents for both the Markit iTraxx Europe and Markit iTraxx Crossover, and all related Sub-
Indices. For the purposes of these Rules, “Relevant Rating” means the lowest of:

1. The lowest of an entity's Issuer Rating, Senior Unsecured Debt Rating, Corporate Family
Rating and Long Term Rating for Moody’s;
2. The lower of an entity's Long-term Issuer Credit Rating and Senior Unsecured Debt Rating for
S&P; or
3. The lower of an entity's Issuer Default Ratings and Senior Unsecured Debt Rating for Fitch.

Rating changes that could affect the index membership are taken into account if Markit is notified of
such change prior to 5:00 pm London time on the last Business Day of the month prior to the month in
which the Roll Date occurs.

 A Relevant Rating of BBB-/Baa3/BBB- (Fitch/Moody's/S&P) in conjunction with a positive

or stable Outlook while not being on negative Watch will be defined as being “Investment
Grade” for the purpose of the Rules.
 A Relevant Rating of BBB-/Baa3/BBB- (Fitch/Moody's/S&P) with negative outlook / on
negative watch or below will be defined “Non-Investment Grade”.

Exchange Rates
The exchange rates used to convert any non-EUR denominated debt amount to EUR will be the
16:00 London rate from WM Reuters for the relevant currency as of the last Business Day of the
month prior to the month in which the Roll Date occurs.

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Markit iTraxx Europe
Prior to the Roll Date the Administrator will create the new series of the Markit iTraxx Europe Index
based on the most recent Markit iTraxx Europe Liquidity List and by applying the Markit iTraxx Europe
General Criteria as set forth below.

The Markit iTraxx Europe Index is composed of one hundred twenty five (125) liquid European
entities with investment grade credit ratings that trade in the CDS market.

Markit iTraxx Europe Liquidity List

As part of the Index Roll process, the Administrator will create the Markit iTraxx Europe Liquidity List
after each publication of the 6 month Analysis Top 1,000 Single Names report or any successor report
thereto, each published by DTCC, or if such report is no longer available, any successor report that
measures liquidity within the CDS market (as applicable, the “DTCC Report”).

Using the average weekly trading activity over the last six months prior to the Roll Date as measured
in the then-current DTCC Report, the Administrator will create the Markit iTraxx Europe Liquidity List
by:
 Determining all entities which:

o are incorporated in Europe, where ‘Europe’ means EU and EFTA member countries;

o are classified as “Europe” for the “DC Region” (“Determinations Committee Region”,
referring to the relevant ISDA Credit Derivatives Determinations Committee, as defined
in the relevant ISDA Credit Derivatives Definitions, the “Credit Definitions”) in the DTCC
Report;

o demonstrate trading activity greater than zero during the last eight weeks preceding the
last Friday of the month prior to month in which the Roll Date occurs, as measured in
the DTCC Report;

o must have an Investment Grade Relevant Rating as defined above.

 Ranking those entities meeting the above criteria, from the most liquid to the least liquid,
based on the notional market risk activity as listed in the relevant DTCC Report. To the extent
that two or more entities are determined to be equally liquid based on notionals, the
Administrator shall rank such entities from the most liquid to the least liquid based on (i) the
number of trades specified in the relevant DTCC Report, or (ii) if an equal number of trades
are specified, in alphabetical order (such overall completed rankings, the “Markit iTraxx
Europe Liquidity Rankings”, and such overall completed list, the “iTraxx Europe Liquidity List”).

 In creating the Markit iTraxx Europe Liquidity Rankings, traded notional volumes as listed in
the relevant DTCC Report for entities that fall under the same ticker but trade separately in the
CDS market (therefore having separate legal entity names) are aggregated to arrive at an
overall volume for those entities when ranking the entities as described above. The most liquid
entity under the ticker qualifies for inclusion in the iTraxx Europe Liquidity List. However in the
event that the most liquid entity under a ticker is not eligible for the index then the next most
liquid entity may be considered instead.

 For bank entities incorporated in Switzerland, the United Kingdom and the Netherlands where
both HoldCo and OpCo entities are listed in the relevant DTCC Report, traded notional
volumes are aggregated to arrive at an overall volume for those entities when ranking these
entities as described above.

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Markit iTraxx Europe General Criteria
To be eligible for inclusion in the Markit iTraxx Europe Index and its sub-indices, an entity on the
Markit iTraxx Europe Liquidity List and Markit iTraxx Europe Financial Supplementary List must satisfy
the following criteria (the “Markit iTraxx Europe General Criteria”):

 Entities must have issued or guaranteed an amount of outstanding publicly traded debt
securities (which, for the avoidance of doubt, excludes loans, equities and privately placed
debt securities) equal to or in excess of €100,000,000 with a maximum remaining maturity of
30 years, at close of business on the tenth Business Day preceding the Roll Date in a
currency that is deliverable into a European CDS contract. For this determination debt issued
by Special Purpose Vehicles created by an insurer or reinsurer for the sole purpose of issuing
debt will also be taken into account. The total debt issued or guaranteed will be determined by
the Administrator based on sources including, but not limited to, public filings and financial
reports of the entity. For new issues of the relevant entities, the first settlement date of the
issue will be used to determine whether the debt should be taken into account for the above
determination.

 Corporate Events. If the Administrator determines at its sole discretion and based on publicly
available information and through consultation with market participants that, due to a
corporate event being announced or occurring it is no longer appropriate to include such
entity taking into account the nature and components of the index, such entity will be
excluded. Corporate events include mergers or other similar events that make the entity
unsuitable for inclusion in the Markit iTraxx Europe Index.

 Credit Events. The Administrator may determine at its sole discretion that an entity is not
suitable for inclusion in the Markit iTraxx Europe index if one of the following occurs on or
after the previous Markit iTraxx Europe index roll date with respect to such an entity:

(a) a notice is published on the ISDA Credit Derivatives Determinations Committee

webpage (http://dc.isda.org/, or any successor webpage thereto) announcing that a
request relating to a potential Credit Event (as defined in the
Credit Derivatives Definitions, the Credit Definitions) in respect of such an entity has
been accepted by the relevant Credit Derivatives Determinations Committee (the
"DC", as defined in the Credit Definitions); provided that as of 5:00 p.m. Relevant City
Time (as defined in the DC Rules published on the ISDA Credit Derivatives
Determinations Committee webpage (http://dc.isda.org/, “DC Rules”) on the first
business day following the day on which the relevant DC is required to convene to
consider such request under the DC Rules (such timeline to be determined without
regard to any ability of the DC to amend the published timetables set forth in the DC
Rules immediately prior to such request), a DC No Credit Event Announcement (as
defined in the Credit Definitions) has not occurred and no announcement to the effect
that such request has been dismissed, withdrawn, or rejected by the relevant DC has
been published on such webpage; or
(b) a DC Credit Event Announcement (as defined in the Credit Definitions) occurs with
respect to such an entity.

As set forth in these Rules, the Administrator may consider any information and make any
determinations necessary in relation to Credit Events to obtain a result that preserves the
integrity of the Markit iTraxx Europe index.

 The entity must not be guaranteed or controlled by (directly or indirectly), or guarantee or

control (directly or indirectly) in either case, an “Affiliate”, that has a higher ranking on the
Markit iTraxx Europe Liquidity List and otherwise satisfies the relevant criteria as determined
at the sole discretion of the Administrator. Where the nature of a corporate action creates
uncertainty as to which entity is higher ranking on the Markit iTraxx Europe Liquidity List, the
most liquid entity as per the trading activity over the last eight weeks preceding the last Friday
of the month prior to the month in which the Roll Date occurs as measured in the DTCC
Report will be selected. “Control” of any entity means ownership of a majority of the voting
power of that entity.

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  The final index comprises 125 entities and is constructed by selecting the highest ranking
entities in each sector from the Liquidity List, subject to the following sector restrictions:
– 30 Autos & Industrials
– 25 Consumers
– 20 Energy
– 20 TMT
– 30 Financials from the iTraxx Europe Liquidity List (separate Senior & Subordinated
indices)

 Financial entities classified under the sub-sector “Specialty Finance” or “Consumer Finance”
(per the iTraxx sector classification) will not be eligible.

 For bank entities incorporated in Switzerland, the United Kingdom and the Netherlands where
either the OpCo or its parent HoldCo entity meet all eligibility criteria, the parent HoldCo entity
will be selected for inclusion provided it meets the relevant rating criteria. However in the
event that either:(i) the OpCo entity has senior non-preferred bonds outstanding, (ii) the
HoldCo entity has not issued regulatory loss absorbing capital or (iii) the bank has declared
intent to issue senior non-preferred debt, the OpCo entity will be selected for inclusion.

 For Danish, French and Spanish OpCo bank entities qualifying for index inclusion, the senior
reference obligations will be selected on the following basis: (i) if the OpCo bank entity has
senior non-preferred bonds outstanding a senior non-preferred bond will be selected; or (ii) if
no senior non-preferred bonds are available for selection, a senior unsecured bond will be
selected.

 Each entity is assigned to its appropriate Markit iTraxx Sector and is ranked within its sector,
i.e. the entity with the highest liquidity is ranked #1.

Sub-Indices are compiled as follows:

 Markit iTraxx Non-Financials comprises the 95 non-financial entities from the Markit iTraxx
Europe index.

 Markit iTraxx Senior Financials comprises the 30 financial entities from the Markit iTraxx
Europe index referencing senior debt.

Markit iTraxx Subordinated Financials comprises the 30 financial entities from the Markit
iTraxx Europe index referencing subordinate debt. Swiss banking entities within the
Subordinated Financials index will be included in the index on the transaction type European
CoCo Financial Corporate.

Creation of the New Markit iTraxx Europe Index Series

Prior to the Publication Date (as set forth below) for a new series of the Markit iTraxx Europe Index,
the Administrator will create the new Markit iTraxx Europe Index by creating the Liquidity List and
applying the General Criteria as stated above to create the New Markit iTraxx Europe Index.

Publication of Provisional Markit iTraxx Europe Index

The list of entities resulting after the steps above (the “Provisional Markit iTraxx Europe Index”) will be
published on Markit’s public website for comment no later than seven (7) Business Days prior to the
Roll Date. The Administrator will review comments received and determine whether amendments are
necessary. The Administrator welcomes public comment, but is not required to follow or otherwise
address any comment received. The Administrator will publish the expected name changes (if any)
on its public website as it determines such changes may be required. The comment period will end
four (4) Business Days prior to the Roll Date. The draft and final annexes for the Markit iTraxx Europe
Index and Sub-Indices will be published as set forth in the 'Publication of Annex' section below.

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Markit iTraxx Crossover
Prior to the Roll Date, the Administrator will create the new series of the Markit iTraxx Crossover
Index based on the most recent Markit iTraxx Crossover Liquidity List and Markit iTraxx Crossover
Supplementary List and by applying the Markit iTraxx Crossover General Criteria as set forth below.

The Markit iTraxx Crossover Index is composed of up to 75 European entities which do not have
Investment Grade credit ratings.

Markit iTraxx Crossover Liquidity List

As part of the Index Roll process, the Administrator will create the Markit iTraxx Crossover Liquidity
List after each publication of the DTCC Report.

Using the average weekly trading activity over the last six months prior to the Roll Date as measured
in the then-current DTCC Report, the Administrator will create the Markit iTraxx Crossover Liquidity
List by:

 Determining all entities which:

o are incorporated in Europe, where ‘Europe’ means EU and EFTA member countries;

o demonstrate trading activity greater than zero during the last eight weeks preceding the
last Friday of the month prior to the month in which the Roll Date occurs as measured
in the DTCC Report;

o are classified as “Europe” for the “DC Region” (“Determinations Committee Region”,
referring to the ISDA Credit Derivatives Determinations Committee, as defined in the
Credit Definitions) in the DTCC Report;

o either:

 have a Non-Investment Grade Relevant Rating as defined above;

 has no Relevant Rating, i.e. is not rated by Fitch, Moody's and S&P
(“Unrated”).

 Ranking those entities meeting the above criteria, from the most liquid to the least liquid,
based on the notional market risk activity as listed in the relevant DTCC Report. To the extent
that two or more entities are determined to be equally liquid based on notionals, the
Administrator shall rank such entities from the most liquid to the least liquid based on (i) the
number of trades specified in the relevant DTCC Report, or (ii) if an equal number of trades
are specified, in alphabetical order (such overall completed rankings, the “Markit iTraxx
Crossover Liquidity Rankings”, and such overall completed list, the “Markit iTraxx Crossover
Liquidity List”).

 In creating the Markit iTraxx Crossover Liquidity Rankings, traded notional volumes in the
relevant DTCC Report for entities that fall under the same ticker but trade separately in the
CDS market (therefore having separate legal entity names) are aggregated to arrive at an
overall volume for those entities when ranking the entities as described above. The most liquid
entity under the ticker qualifies for inclusion on the Markit iTraxx Crossover Liquidity List.
However in the event that the most liquid entity under a ticker is not eligible for the index then
the next most liquid entity may be considered instead.

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Markit iTraxx Crossover General Criteria
To be eligible for inclusion in the Markit iTraxx Crossover Index, an entity on the Markit iTraxx
Crossover Liquidity List must satisfy the following criteria (the “Markit iTraxx Crossover General
Criteria”):

 The entity must have issued or guaranteed an amount of outstanding publicly traded debt
securities (which, for the avoidance of doubt, excludes loans, equities and privately placed
debt securities) equal to or in excess of €100,000,000 with a maximum remaining maturity of
30 years, at close of business on the tenth Business Day preceding the Roll Date in a
currency that is deliverable into a European CDS contract. The total debt issued or
guaranteed will be determined by the Administrator based on sources including, but not
limited to, public filings and financial reports of the entity. For new issues of the relevant
entities, the first settlement date of the issue will be used to determine whether the debt
should be taken into account for the above determination.

 Corporate Events. If the Administrator determines at its sole discretion and based on publicly
available information and through consultation with market participants that, due to a
corporate event being announced or occurring it is no longer appropriate to include such
entity taking into account the nature and components of the index, such entity will be
excluded. Corporate events include mergers or other similar events that make the entity
unsuitable for inclusion in the Markit iTraxx Crossover Index.

 Credit Events. The Administrator may determine at sole its discretion that an entity is not
suitable for inclusion in the Markit iTraxx Crossover index if one of the following occurs on or
after the previous Markit iTraxx Crossover index roll date with respect to such an entity:

(a) a notice is published on the ISDA Credit Derivatives Determinations Committee

webpage (http://dc.isda.org/, or any successor webpage thereto) announcing that a
request relating to a potential Credit Event (as in the Credit Definitions) in respect of
such an entity has been accepted by the relevant DC; provided that as of 5:00 p.m.
Relevant City Time (as defined in the DC Rules) on the first business day following
the day on which the relevant DC is required to convene to consider such request
under the DC Rules (such timeline to be determined without regard to any ability of
the DC to amend the published timetables set forth in the DC Rules immediately prior
to such request), a DC No Credit Event Announcement (as defined in the Credit
Definitions) has not occurred and no announcement to the effect that such request
has been dismissed, withdrawn, or rejected by the relevant DC has been published
on such webpage; or
(b) a DC Credit Event Announcement (as defined in the Credit Definitions) occurs with
respect to such an entity.

As set forth in these Rules, the Administrator may consider any information and make any
determinations necessary in relation to Credit Events to obtain a result that preserves the
integrity of the Markit iTraxx Crossover index.

 The entity must not be guaranteed or controlled by (directly or indirectly), or guarantee or

control (directly or indirectly) in either case, an “Affiliate”, that has a higher ranking on the
Markit iTraxx Crossover Liquidity List and otherwise satisfies the relevant criteria as
determined at the sole discretion of the Administrator. Where the nature of a corporate action
creates uncertainty as to which entity is higher ranking on the Markit iTraxx Europe Liquidity
List, the most liquid entity as per the trading activity over the last eight weeks preceding the
last Friday of the month prior to the month in which the Roll Date occurs as measured in the
DTCC Report will be selected. “Control” of any entity means ownership of a majority of the
voting power of that entity.

 Financial entities (per the iTraxx sector classification) are not eligible. However entities
classified under the sub-sector “Specialty Finance” (per the iTraxx sector classification) will be
eligible.

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  An entity with no Relevant Rating must have an average spread at least one and a half (1.5)
times the average spread of the constituents of the new Markit iTraxx Non-Financial Index.
1
o For this determination the Markit End of Day Composite CDS Spreads at the 5 Year
tenor are used. The average spread over the last 10 Business Days of the month prior
to the month in which the Roll Date occurs are calculated for each entity, and evaluated
against the average spread of all constituents of the Markit iTraxx Non-Financial Index
(over the same 10 Business Day period) to determine eligibility. (For example, if the
average spread of the all entities in the new Markit iTraxx Non-Financial Index effective
20 March was 40 bps over the last 10 Business Days in February, then only those
entities whose average spread over the last 10 Business Days in February was 60 bps
or higher will qualify for the new series of the Markit iTraxx Crossover index).

 The entity must have a maximum CDS upfront of 50 points corresponding to 500 bps running
spread.
o For this determination, the Markit End of Day Composite CDS Upfronts at the 5 year
tenor are used to calculate the average upfront of the entity over the last 10 Business
Days of the month prior to the month in which the Roll Date occurs.
o The upfront levels used are calculated by Markit by converting Markit End of Day
Composite CDS Spreads to upfronts using the ISDA standard model.

Markit iTraxx Crossover Supplementary List

If less than 75 entities are available from the Markit iTraxx Crossover Liquidity List that satisfy the
above criteria, a supplementary list compiled in accordance with this section (“the Crossover
Supplementary List”) is used to select additional names.

Creation of the Markit iTraxx Crossover Supplementary List

The Administrator will create a list according to the following criteria:

 Entities must be incorporated in Europe, where ‘Europe’ means EU and EFTA member
countries.

 Entities must have an aggregate minimum of €750,000,000 outstanding and included (under
the same ticker) in the iBoxx EUR High Yield unconstrained cum crossover
Index(IBXXHCX1) (the “Selection Index”) as published in the Selection Index on the first
business day of the relevant roll month. Furthermore:

o for this determination all publicly traded debt at all tiers, including senior and
subordinated, secured and unsecured included in the Selection Index;
o loans, debt guaranteed (but not issued) by the entity, convertibles and privately
placed debt securities will be excluded;

 Entities must not be guaranteed or controlled by (directly or indirectly), or guarantee or control

(directly or indirectly) in either case, an “Affiliate”, that has a higher ranking on the Markit
iTraxx Crossover Liquidity List or Markit iTraxx Crossover Supplementary List and otherwise
satisfies the relevant criteria as determined by the Administrator. “Control” of any entity means
ownership of a majority of the voting power of that entity.

1
Where credit default swap spreads are required to determine eligibility for inclusion, whether it be in par spread terms or in
points upfront, the “Markit CDS End of Day” service will be used. Markit receives contributed CDS data from market makers
official books of record. This data undergoes a rigorous cleaning process before being aggregated to form the “Markit CDS End
of Day” Composite.

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  Entities must not appear on the DTCC Report in order to be candidates for the Crossover
Supplementary List, though affiliates of entities on the DTCC Report are eligible for the
Crossover Supplementary List as long as existing rules concerning affiliates within the
Crossover index are met.

 Entities must not have issued debt via Loan Participation Note (LPN) programs.

Ranking of the Crossover Supplementary List

Once the list is created as set out under the “Creation of the Crossover Supplementary List” above
the list will be ranked by ticker according to the below rules.

 The Crossover Supplementary List will consist of those entities which satisfy the above criteria
and ranked by the largest amount of debt included in the Selection Index . To the extent that
two or more entities are determined to have the exact same amount of debt included in the
Selection Index, the Administrator shall rank such entities by (i) the total amount of senior
unsecured debt included in the Selection Index for all eligible entities under the relevant ticker
and if still two or more names are equally ranked by (ii) the most recent senior unsecured
issuance included in the Selection Index from all eligible entities under the relevant ticker.

Selecting an Entity within a Ticker

 For the purposes of the Crossover Supplementary List, entities will be considered Eligible if
one or more of the following criteria is satisfied:

o the entity has a Non-Investment Grade Relevant Rating;

o is Unrated and at least one bond issued by the entity included in the Selection Index is
rated Non-Investment Grade by at least one of S&P, Moody’s or Fitch (entities which
are Unrated and have only have Unrated debt outstanding will not be Eligible);

 If multiple entities have bonds included in the Selection Index under the same ticker, the entity
that is a candidate for inclusion in the Crossover Supplementary List is the one which has the
largest amount of Senior Unsecured debt included in the Selection Index.

 If none of the entities under the same ticker have Senior Unsecured debt included in the
Selection Index then entities with Senior Secured debt included will be considered.

 Where there is only one entity under the relevant ticker and this entity has only Senior Secured
debt included in the Selection Index, this entity will be selected for the Crossover
Supplementary List.

 If there are multiple Eligible entities under the relevant ticker and all of these entities have only
Senior Secured debt included in the Selection Index, the Administrator will endeavour to select
the Eligible entity which has the largest amount of lower ranking Senior Secured debt included
in the Selection Index for the Crossover Supplementary List.

o The Administrator may use bond and/or entity ratings and consult with Markit RED in
order to achieve this.

o If the Administrator believes that the Senior Secured debt included for these entities is
of equal ranking, then the Eligible entity with the largest amount of Senior Secured
debt included in the Selection Index will be selected.

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  For the purposes of choosing an entity within a ticker:

o Only bonds with maturities of 30 years or below from the new index start date will be
considered when determine outstanding amounts.

o PIK notes and convertibles will not be considered. (To clarify - PIK notes are
considered when determining New Debt Issuance.)

Debt Tier Classification

The below criterion is used to establish the Debt Tier classification of a bond for determining eligibility
of the issuing entity for the Markit iTraxx Crossover Supplementary List, as follows:

o The bond will be classified as Senior Unsecured if any of the below criteria are satisfied:

– The bond's rating from Moody’s is equal to the Moody’s Senior Unsecured or
Moody’s Senior Subordinate Debt Rating.
– The bond rating from S&P is equal to the S&P Senior Unsecured or S&P
Senior Subordinate Debt Rating.
– The bond rating from Fitch is equal to the Fitch Senior Unsecured or Fitch
Senior Subordinate Debt Rating.

o The bond will be classified as Senior Secured if any of the below criteria are satisfied:

– The bond's rating from Moody’s is equal to the Moody’s Senior Secured Debt
Rating.
– The bond rating from S&P is equal to the S&P Senior Secured Debt Rating.
– The bond rating from Fitch is equal to the Fitch Senior Secured Debt Rating.

 If the above tests are inconclusive, then the Markit RED Tier classification (if available) is
used. Bonds with a Subordinated Markit RED Tier classification will be ranked as Senior
Unsecured.

 If the above tests are inconclusive and the Markit RED Tier classification is unavailable then
the bond is considered to be Senior Unsecured.

Creation of the New Markit iTraxx Crossover Index Series

The final portfolio comprises up to 75 names with the highest ranking entities from the Markit iTraxx
Crossover Liquidity List and if required, the Crossover Supplementary List. In both cases all entities
must meet the iTraxx Crossover General Criteria set forth above to be included. If there are less than
75 entities available the index will consist of the number of entities available rounded down to a
multiple of 5.

Publication of Provisional Markit iTraxx Crossover Index

The list of entities resulting after the steps above (the “Provisional Markit iTraxx Crossover Index”) will
be published on Markit’s public web site for comment no later than seven (7) Business Days prior to
the Roll Date. The Administrator will review comments received and determine whether amendments
are necessary. The Administrator welcomes public comment, but is not required to follow or otherwise
address any comment received. The Administrator will publish the expected name changes (if any) on
its public website as it determines such changes are required. The comment period will end four (4)

Copyright © 2018, Markit Group Limited. All rights reserved. www.markit.com 12

Business Days prior to the Roll Date. The draft and final annexes for the Markit iTraxx Crossover
Index will be published as set forth below.

Markit iTraxx Europe & iTraxx Crossover Indices

Final Review of Constituent List

If on any day prior to the date of the publication of a final index annex, the Administrator determines
that any entity that is intended to be included in the relevant index fails any of the Markit iTraxx
Europe General Criteria or Markit iTraxx Crossover General Criteria, then such entity shall be
excluded from the Markit iTraxx Europe or Markit iTraxx Crossover Indices, as applicable.

If the Administrator determines that any entity shall be excluded from the Markit iTraxx Europe or
Markit iTraxx Crossover Index in accordance with the preceding paragraph, then the highest ranked
entity in the Markit iTraxx Europe or Markit iTraxx Crossover Liquidity Lists (or Crossover
Supplementary List, if the new entity cannot be selected from the Markit iTraxx Crossover Liquidity
List), as applicable that has not already been included in the Markit iTraxx Europe or Markit iTraxx
Crossover Index, as applicable, shall be added to the new Markit iTraxx Europe or Markit iTraxx
Crossover Index, respectively, as a replacement entity.

If the new entity cannot be selected from the Markit iTraxx Crossover Liquidity List for the new Markit
iTraxx Crossover Index, the entity will then be selected from the Crossover Supplementary List as
described above.

Where a determination with regard to constituent selection is made by the Administrator which
involves discretion and/or expert judgement, Markit will consult the Index Advisory Committee for
guidance. Such determinations will be documented, communicated to stakeholders via e-mail and
published on the Markit website www.markit.com/Product/Indices under the iTraxx News page. Where
similar determinations are made, precedents set by previous decisions will be considered across all
CDS indices.

In the unlikely instance an inaccuracy is not caught and resolved prior to the publication of the final list,
or if input data used in the constituent selection process is revised retrospectively, Markit will review
the impact on the affected indices. In order to determine whether to restate the final list or any index
parameters, Markit will consult with the Index Advisory Committee to determine the impact of such
action.

If it is decided to update the Final List or any related parameters, the reason for such revision together
with revised material will be published. In addition, Markit will compile an incident report to summarize
the incident, the root cause, and set forth remedial actions to avoid such an error in the future, where
such remedial actions are applicable.

Publication of Annex
No later than three (3) Business Days prior to the Roll Date of a Markit iTraxx Europe or Markit iTraxx
Crossover Index, the Administrator will publish a draft of the annex for such Markit iTraxx Europe or
Markit iTraxx Crossover Index and each Sub-Index, along with the weighting and final Reference
Obligations (as defined in the Credit Definitions) for each entity. The final annex for the Markit iTraxx
Europe and Crossover Indices and each Sub-Index will be published after 5:00 p.m. on the Business
Day immediately preceding the Roll Date of the Indices.

Coupon & Recovery Rates

Fixed rates and recovery rates will be determined by the Administrator in its sole discretion based on
industry rates and updated from time to time.

Copyright © 2018, Markit Group Limited. All rights reserved. www.markit.com 13

Disclaimer
The Administrator does not undertake any duty of care and will not be liable to any party to a
transaction referencing a Markit iTraxx Europe or Markit iTraxx Crossover or related Sub-Index for
any form of damages, whether direct, indirect, special, consequential or otherwise, that might arise in
connection with the Administrator's performance of its duties under the Rules, except in the case of
the Administrator's gross negligence, fraud or willful misconduct.

Further information
Markit Indices Limited

Tel: 00800 6275 4800

Fax: +44 20 7260 2001
E-mail: [email protected]
Internet: www.markit.com

Licenses and Data

Markit (through the entities Markit North America, Inc., Markit Indices Limited and Markit Group
Holdings) owns all iTraxx, iTraxx SovX and CDX data and indices and the intellectual property rights
therein. A license is required to create and/or distribute any product that uses, is based upon or refers
to any iTraxx, iTraxx SovX and CDX index or iTraxx, iTraxx SovX and CDX data.

Copyright © 2018, Markit Group Limited. All rights reserved. www.markit.com 14