Statement of Compliance with IOSCO Principles · 2015-05-20 · Statement of Compliance with IOSCO Principles | 05 Section 2: Oversight of Third Parties CFII manages all aspects of

Statement of Compliance with IOSCO Principles

May 14, 2015

Statement of Compliance with IOSCO Principles | 02

Introduction: Statement of Compliance

Citigroup operates its fixed income index business through its affiliate Citigroup Index LLC under the brand and

business name of Citi Fixed Income Indices (“CFII”). CFII develops, calculates, publishes, maintains and licenses the

family of fixed income indices listed in the CFII Index Guide, which is available at www.yieldbook.com/citi-indices, as

well as a number of custom indices developed to fulfill specific client needs (each, an “Index,” and collectively, the

“Indices”).

Citi considers the Indices to fall within the definition of Benchmark as set out in the final report on “Principles for

Financial Benchmarks” as published by the International Organization of Securities Commissions on July 17, 2013

(“IOSCO Principles”).1 Accordingly, CFII is an Administrator of the Indices for the purposes of this statement.

CFII, as an established global index provider, acknowledges the importance of integrity of Benchmarks in financial

markets. CFII is committed to operating its business in accordance with the IOSCO Principles and other relevant

industry standards and has taken proactive steps in response to new industry and regulatory standards on financial

indices.

This statement seeks to describe the extent of Citi’s compliance with the IOSCO Principles with respect to the Indices

that are administered by CFII.

For the avoidance of doubt, this statement is not intended to cover indices owned and calculated by other business

areas of Citigroup, including, but not limited to, indices which may include components from equities, commodities, FX

and fixed income markets (or a combination of such underlying interests) and where such indices are administered by

affiliates of Citigroup Index LLC including, but not limited to, Citigroup Global Markets Inc., Citigroup Global Markets

Limited and Citibank N.A., London branch through designated teams in the Institutional Clients Group, and are covered

by a separate statement of compliance.

Further information regarding CFII, the Indices it administers, this statement of compliance or the applicable control

and oversight framework are available upon request.

May 2015

1 Capitalized terms used in this document, but not defined, shall have the meaning ascribed to such terms in the IOSCO Principles.

http://www.yieldbook.com/citi-indices


Contents

Introduction: Statement of Compliance .............................................................................................................................. 2

Section 1: Overall Responsibility of the Administrator ........................................................................................................ 4

Section 2: Oversight of Third Parties .................................................................................................................................. 5

Section 3: Conflicts of Interest for Administrators ............................................................................................................... 6

Section 4: Control Framework for Administrators ............................................................................................................... 7

Section 5: Internal Oversight .............................................................................................................................................. 9

Section 6: Index Design .................................................................................................................................................... 11

Section 7: Data Sufficiency ............................................................................................................................................... 12

Section 8: Hierarchy of Data Inputs .................................................................................................................................. 13

Section 9: Transparency of Index Determinations ............................................................................................................ 15

Section 10: Periodic Review ............................................................................................................................................. 16

Section 11: Content of the Methodology .......................................................................................................................... 17

Section 12: Changes to the Methodology ......................................................................................................................... 18

Section 13: Transition ....................................................................................................................................................... 19

Section 14: Submitter Code of Conduct ........................................................................................................................... 20

Section 15: Internal Controls over Data Collection ........................................................................................................... 21

Section 16: Complaints Procedures ................................................................................................................................. 22

Section 17: Audits ............................................................................................................................................................. 23

Section 18: Audit Trail ....................................................................................................................................................... 24

Section 19: Cooperation with Regulatory Authorities ....................................................................................................... 25


Section 1: Overall Responsibility of the Administrator

Citi operates its fixed income index business through Citigroup Index LLC under the brand and business name of Citi

Fixed Income Indices. As a standalone business unit, CFII is the administrator of the indices listed in the CFII Index

Guide, which is available at www.yieldbook.com/citi-indices, as well as a number of custom indices developed to fulfill

specific client needs. As administrator, CFII has primary responsibility for the day-to-day development, calculation,

publication, maintenance, and licensing of the Indices.

To ensure data accessibility, transparency and timely publication of Index-related information, CFII employs multiple

channels of distribution. The CFII website (www.yieldbook.com/citi-indices) offers Index information, including the latest

profiles, certain historical data, Index methodology, and announcements about Index changes. CFII also conveys

information on CFII’s Indices through financial news organizations and data and analytic vendors.

CFII, as an established global index provider, is committed to maintaining the highest compliance standards and has

taken proactive steps in response to new industry and regulatory standards on financial indices. In particular, CFII has

established a governance committee (Citi Fixed Income Indices Governance Committee, “CFIIGC”) with a primary

focus on governance, regulatory and risk control matters to provide oversight on Index administration, ensure

accountability, and give guidance on best governance practices to the rest of the business.

In addition CFII has a separate committee, the Citi Fixed Income Indices Business Committee ("CFIIBC"), which is

responsible for overseeing the on-going development, maintenance, calculation, production and publication of Indices,

the exercise of professional judgment and the integrity of methodologies, inputs and related processes.

Together the CFIIGC and CFIIBC form the oversight function of CFII, each with their respective areas of oversight

focus and accountability as further described in Section 5. CFIIBC notifies CFIIGC of all reviews and approvals it gives.

To facilitate this shared oversight function and ensure information is properly communicated and shared between the

two committees, all CFIIBC approvals are reviewed with the CFIIGC at the regular governance meetings. Where the

IOSCO Principles require any documents to be Published or Made Available, CFII confirms that it intends to do so.




Section 2: Oversight of Third Parties

CFII manages all aspects of the Index determination process. While it sources some prices and securities information

from recognized third-party providers (refer to the CFII Index Guide), CFII does not outsource responsibility for Index

determination processes to any third parties. Additionally such relationships are governed by contracts that set out the

roles and obligations of such third parties. As such, the oversight requirement described in Principle 2 does not apply to

this aspect of CFII or its processes.

Nevertheless, CFII continuously monitors the quality of all of the inputs provided by its third-party providers, for

example through regular price validation checks, challenges, and periodic market coverage analysis. CFII also

maintains relationships with a diverse pool of providers to mitigate dependency risk and to facilitate comparisons.

CFII utilizes certain technology systems, tools and models hosted and maintained by CFII’s affiliate, The Yield Book

Inc., that are used in the calculation, production and distribution of Index data. CFII and The Yield Book Inc. share

common management.

CFII and Research Affiliates LLC (“RA”) have entered into a relationship whereby CFII is the Administrator for certain

co-branded fixed-income Indices. RA determines and provides CFII with the issuer weights used by CFII to calculate

such Indices, and CFII and RA annually consult on any changes to the criteria and calculation methodology applicable

to such Indices.

CFII has written arrangements in place with RA clearly defining the roles and obligations, and standards expected, of

all parties, and CFII will monitor compliance with these arrangements.

The operational risks, if any, are considered, and planned for, by CFII under its current control frameworks, and will be

incorporated into the formal control framework document currently in preparation.


Section 3: Conflicts of Interest for Administrators

The Citi Code of Conduct sets out a framework for the management of conflicts of interest for all Citi employees

globally, and therefore applies to all CFII personnel. All CFII personnel are required to confirm annually that they have

read and understood the Citi Code of Conduct and will comply with it.

Further, CFII has additionally implemented the CFII Conflicts of Interest Procedures which is specifically tailored to

protect the further integrity and independence of CFII throughout the Benchmark determinations process.

With regard to (i) segregation of reporting lines, (ii) rewards and incentives, and (iii) ownership structure or control, CFII

operates as a separate business from Citi’s broker-dealer entities, and conflicts of interest arising from CFII's

ownership or control structure will be disclosed to stakeholders and applicable regulatory authorities if and when they

arise, as soon as reasonably possible. The Global Head of CFII does not have a reporting line to the trading desks of

these entities. Furthermore, CFII staff and managers involved in the creation and production of the Indices are not

involved in the creation, sale, or trading of any financial products that use the Indices as a basis for determining

amounts payable. Finally, the goals, rewards and incentives for CFII personnel who participate in Index determinations

are not directly or indirectly tied to the levels of the Indices or to trading revenue generated from products linked to the

Indices.

CFII uses prices from Citi traders and third party providers for its Indices. Regardless of source, CFII independently

validates the prices using CFII models and other sources. (Please refer to Section 8 for additional information on data

inputs.) Additionally, price challenges and the handling of the results of such challenges prior to Index determinations

are clearly documented and subject to a maker-checker procedure or supervisor review.

The Citi Code of Conduct and Citigroup Confidentiality of Information Policy require CFII personnel to protect the

confidentiality of non-public data, information and other inputs submitted to, received by, or produced by CFII and in

general to communicate information on a need-to-know basis only. Accordingly, and pursuant to the CFII Conflicts of

Interest Procedures, CFII does not communicate potentially market sensitive information about the Indices until it

simultaneously discloses the information to Index Subscribers, commercial data vendors, and the public.


Section 4: Control Framework for Administrators

While no formal control framework is currently set out in one document, CFII has implemented robust process and

structure for the design, development, maintenance and distribution of its Indices. CFII intends to review its process

and structure with the same frequency as its periodic audits, and will enhance them as necessary to establish the

necessary control framework. A formal control framework document is currently in preparation.

Internal Oversight: Management and oversight of CFII is provided by the CFIIBC and the CFIIGC.

Conflicts of Interest: CFII personnel involved in the creation, modification, and calculation of the CFII Indices must act

in a manner that (i) promotes their accurate calculation and reporting, (ii) ensures confidentiality of non-public

information, and (iii) mitigates potential conflicts of interest. Towards providing a suitable framework, CFII has

instituted the CFII Conflicts of Interest Procedures which covers (i) ownership structure or control, (ii) segregation of

reporting lines, (iii) rewards and incentives, (iv) segregation and control of information, (v) supervision and validation

process, (vi) conflict of interest disclosure, and (vii) employee personal trading and investments.

Whistleblowing: CFII employees are obligated to comply with the Citi Code of Conduct, which sets the expectation

that employees will, and encourages employees to, escalate all possible violations of a law, regulation, Citi policy or

ethical standard.

Index Complaints Procedures: CFII encourages customers and other users of its Indices to submit any questions,

comments or complaints to CFII via email or phone, which are all monitored by dedicated CFII Help Desk staff, who are

appropriately trained to deal with such contact. CFII also has Index Complaints Procedures which describes the

handling of complaints.

Index Process: CFII has established a robust process for the calculation, maintenance and publication of Indices. The

CFII Index Process document defines the data sources, hierarchical use of pricing data, calculation methodology,

Index determinations, validation, and the use of expert judgment.

Maintenance, Periodic Review and Communication: All Indices are periodically reviewed to gauge whether each

Index continues to adequately represent the intended market. During the review CFII may consider the Index

constituents, design criteria, and calculation methodologies. If CFII determines that the Index should be modified or is

no longer suitable, the CFIIBC must approve the modification or discontinuation of the Index, notify the CFIIGC, and

communicate the modification or discontinuation to its customers and the public via the CFII website

(www.yieldbook.com/citi-indices).

Information Published and Made Available: The CFII Index Guide provides an overview of the available Indices, and

describes the characteristics, rules, and general construction methodology for the Indices. The CFII Index Guide is

available to Index users and the public via the CFII website (www.yieldbook.com/citi-indices).




Expertise: Indices are governed by a transparent set of rules. The rules are documented in the Index methodologies

made available to Index users. Predefined Index rules are applied each month by CFII’s automated systems or by CFII

staff using the support of control tools to determine the Index profiles. Index data analysts are trained on the Index

construction rules, systems and support tools for the purpose of securities price validation and Index determination.

The training covers the exercise of Expert Judgment when information is either unavailable or appears to be

inaccurate. The exercise of Expert Judgment is subject to oversight by the CFIIBC.

Infrastructure and Risk Management: Operational risk is mitigated by maintaining a separate infrastructure from that

of Citi's trading desks. CFII also operates a 24 hour global support center to promptly address any issues with a CFII

Index that may arise.


Section 5: Internal Oversight

The CFIIGC provides oversight of the development, calculation, publication, maintenance, and licensing of Indices,

with its primary focus being on governance, regulatory, and risk control matters. CFIIGC’s oversight responsibilities

include the review of proposals for new indices, modification of existing Indices and methodologies, changes to Index

administration processes, discontinuation of Indices, as well as considering results of the periodic audits performed.

The CFIIGC has broad oversight over CFII’s processes and procedures to ensure consistency with the IOSCO

Principles. The CFIIGC may also review matters relating to regulatory, operational and franchise risk issues arising

from CFII’s activities.

To provide both suitable scrutiny and effective governance, the CFII Governance Committee is composed of: i)

independent members from control and risk functions of Citi such as Legal, Compliance and Risk Management;

together with, ii) CFII senior managers who can drive the adoption and execution of new best practices. In order to

facilitate its oversight activities, the CFIIGC may at any time request information from the CFIIBC that may include

written business procedures, policies, and special analyses to help the CFIIGC guide or challenge the business as

necessary.

The CFIIGC is committed to ensuring consistency with the IOSCO Principles in all aspects of CFII's business. This may

involve the exercise of proportionality in relation to certain of the Principles; however where proportionality is exercised,

the CFIIGC must be satisfied that the risk of adverse consequences arising due to that exercise of proportionality is low

and continuously monitored.

CFII’s oversight function also depends in part on the CFIIBC. The following describes the relative roles of the CFIIGC

and CFIIBC:

CFIIBC CFIIGC

Accountability and Areas of Focus of each Committee Comprising the Oversight Function

Oversight of on-going Index development, maintenance, calculation, production and publication.

Oversight of exercise of professional judgment, ensuring integrity and consistent application of rules of published methodologies, inputs and related processes.

Governance and regulatory, risk and control matters.

Challenges to CFII on its Index determination process, operational and control framework.

Recommendation for special analysis to be carried out by CFIIBC or CFII, internally or externally, including the ability to authorize or request consultations with Stakeholders if required.

Review of any potential or existing conflict of interest.

Shared responsibilities

Oversight of Index design including but not limited to: i) Index periodic reviews, ii) risk and conflict assessments, iii) oversight of Index modifications, iv) review and approval of Index termination


including cessation procedures and guidelines for consultation with Stakeholders if required.

Oversight of integrity of Index determination and related control framework, including but not limited to: i) ensuring oversight of Index operations, ii) reviewing audit results and remediation proposals, and iii) remaining informed about issues and risks to the Indices.

Frequency of Meetings and Approvals

Weekly meeting with key CFII personnel.

Submissions can be reviewed and approvals can be provided on an ad-hoc basis from voting members of the CFIIBC.

As necessary. Not less than two times a year.

Relevant requests and any necessary approvals are reviewed and granted during the scheduled meetings.

Composition Senior managers and responsible officers of CFII, together with

Senior managers from CFII’s related Fixed Income analytics system business (“Yield Book”)

i) Independent members from control and risk functions of Citi such as Legal, Compliance and Risk Management, together with,

ii) CFII senior managers who can drive the adoption and execution of approved policies and procedures.


Section 6: Index Design

The design of CFII Indices follows a systematic set of procedures as outlined in the CFII Index Design and

Maintenance Procedures and the CFII Index Guide.

Each proposed new index and Index criteria change is subject to the following:

a thorough review of the proposal, including consideration of the Index features against the CFII standard list of

desirable index characteristics (see below);

approval from the CFIIBC; and,

notification of the proposed new index or material change to the criteria for an existing Index to the CFIIGC prior to

implementation.

In the planning phase of each new Index, CFII requires proposals to be submitted for reviews and approvals by

completion of the New Index / Product Request Form together with the business rationale for the Index, the basis for

the Index rules, and the reasons for including/excluding certain securities or sectors.

CFII takes into account various factors when developing or modifying an Index, including:

Relevance: An Index should be relevant to investors. It should track those markets of most interest to investors.

Comprehensiveness: An Index should include all opportunities that are realistically available to market

participants under normal market conditions.

Replicability: The returns reported for an Index should be replicable by market participants.

Stability: An Index should not change criteria often and changes should be easily understood and predictable.

Barriers to Entry: The markets included in an Index should not contain significant barriers to entry.

Simple and objective selection criteria: A clear set of rules should govern the inclusion of bonds or markets in

an Index, and investors should be able to forecast changes in composition.

(Please refer to Sections 8 and 11 for additional information.)


Section 7: Data Sufficiency

The CFII Index Process and CFII Price Validation and Tolerance Checks documents define the data inputs based on

the hierarchy of data inputs set out in Principle 8, the Index price validation processes, and the tolerances for the

production of the Indices.

The over-the-counter (and potentially illiquid) nature of the bond market requires that Index constituent prices come

from a variety of sources, such as observed transaction levels for Index securities, valuations provided by recognized

market-makers including Citigroup, and third party pricing data vendors. Pricing levels may be in the form of price as a

percentage of par, yield, or spread relative to a reference curve or reference security.

CFII’s goal is to use data that accurately and reliably represents the Interest measured by the Index and such data

should be anchored by observable Bona Fide, Arms-length Transactions. For each Index, CFII applies the respective

hierarchical use of data inputs and Expert Judgment described in the CFII Index Guide. (Refer to Section 8 for

additional information.)


Section 8: Hierarchy of Data Inputs

The CFII Index Process sets out guidelines for the hierarchal use of data inputs and the exercise of Expert Judgment in

Index determinations to ensure the quality and integrity of the Indices. Since transaction data is not always readily-

observable for all bonds, CFII may utilize non-transactional data such as indicative or confirmed bids and offers,

extrapolations from prior transactions, matrix pricing based on other securities, or the use of Expert Judgment for a

given Index determination.

CFII periodically (a) reviews the securities that have been systematically identified to be removed from, or added to,

each Index, and (b) then either confirms, or rejects subject to supervisory oversight, the additions and deletions.

Separately, CFII reviews the pricing data for the Index against its own validation models and may do so against other

sources of pricing information to identify potential anomalies, and uses judgment to resolve the potential anomalies.

The resolution may involve keeping the price, modifying the price, using the prior business day’s price, or using an

alternate source of data.

Terms and Conditions

CFII obtains the terms and conditions for securities from industry-recognized data sources, including data vendors and

the issuers’ public disclosures. CFII then systematically screens the identified terms and conditions to identify the

securities that meet the criteria for the Indices.

Pricing

The illiquid and over-the-counter nature of the bond market requires the constituent prices of the Indices to come from

a variety of sources, such as observed transaction levels for index securities, valuations provided by recognized market

makers including Citigroup, and third party pricing data vendors. Pricing levels may be in the form of price as a percent

of par, yield, or spread relative to a reference curve or reference security.

When no price exists for a bond for a given day, prices may be rolled from the previous business day, a backup source

may be used, or a matrix-pricing algorithm may be applied to infer the appropriate level for one bond based on either

historical or current price relationships between that bond and bonds for which prices are known. In some cases, prices

may be confirmed against other pricing sources for that same security or for similar securities. Information on pricing

source inputs for specific Indices is available in the CFII Index Guide which is available at www.yieldbook.com/citi-

indices. CFII also maintains a list of Indices and pricing sources for internal price validation. Details with respect to the

pricing validation process and tolerance checks are available in the CFII Price Validation & Tolerance Checks

document.

Expert Judgment

Predefined Index rules are applied to a universe of individual securities to determine each month’s Index profile and

valuation. As with the sources of terms and conditions, the Index rules are transparently defined so that Index users

can follow the same process and construct the Index profile which reflects the Index composition and weight of each




component for themselves. The specific rules, and the occasional changes in rules, are defined and published in the

CFII Index Guide.

Index data analysts are trained to use the Index construction and pricing tools to accurately create and price the

Indices following the predefined rules. There are occasions when the data analysts must use Expert Judgment

because information is either unavailable or inaccurate. When this occurs, the analyst will use the Index tools to

override information to update its value. Any values that are overridden by the use of Expert Judgment are logged in

the individual tool used to manage that segment of data. The use of Expert Judgment is overseen by the oversight

function.

Data Discrepancy

If the bond screening process produces inconclusive results, typically because data is unavailable, incorrect or

incomplete, CFII contacts the appropriate data source to resolve the data inadequacy. The data vendor will then send

updates to resolve the data problem. Occasionally, the data source will not respond within the time necessary to meet

the Index fixing deadline. In that case, CFII either rejects the change and the update will take place in the subsequent

month’s Index profile, or overrides the data element temporarily when the data is confirmed. CFII keeps records in

either circumstance, with the action taken by the analyst recorded with an expiration date and an explanation, as well

as the ID of the data analyst.


Section 9: Transparency of Index Determinations

With over 25 Indices, each of the Indices having its own sub-indices and related indices representing around 100,000

sub-indices and sector combinations maintained daily, CFII focuses on the transparency of its data inputs and

Methodology, as discussed in Sections 8 and 11, rather than attempting to publish descriptions and explanations for

each Index determination that would delay the publication of the Indices.

In particular, the CFII Index Process requires the Index determination process to be clearly documented and

transparently disclosed. Also, the Index Design and Maintenance Procedures provide guidelines for various types of

communications and publications, ensuring adequate transparency throughout the life cycle of the Indices.

CFII Indices have a set of rules that govern the inclusion of the individual Index constituents. The rules are clearly

documented and available to Index users via the CFII Index Guide and factsheets available at www.yieldbook.com/citi-

indices. When changes in the rules are made, they are clearly articulated to the Index users and sufficient time is given

to users so they can interpret the changes. Announcements are published, and distributed via subscription, on

www.yieldbook.com/citi-indices.

The Index rules are transparently defined so that the Index users can follow the same process and construct the Index

profile which reflects the Index composition and weight of each component for themselves. The specific criteria for the

Indices are defined and published in the CFII Index Guide.

(Please refer to Sections 8 and 11 for additional information.)

http://www.yieldbook.com/citi-inidces

http://www.yieldbook.com/citi-inidces



Section 10: Periodic Review

CFII reviews each Index every two years to gauge whether the Index continues to adequately represent the intended

securities market.

During the review CFII may consider the Index constituents, design criteria, and calculation methodologies. CFII may

also consult with investors, Citi’s independent Fixed Income Research department, and Citi’s bond trading desks. Note

that the consultations are subject to the CFII Conflicts of Interest Procedures, which require confidentiality rules to be

complied with as well as communications on a need to know basis only.

If CFII determines that the Index should be modified or is no longer suitable, the CFIIBC must approve the modification

or termination of the Index, notify the CFIIGC, and communicate the modification or termination to Subscribers, other

users and the public via the CFII website (www.yieldbook.com/citi-indices). The CFIIBC or the CFIIGC may require

additional analyses and a consultation procedure to be undertaken before the change or termination is approved.

Where either CFIIBC or CFIIGC deem the proposed changes to be material, or where they deem it appropriate in the

case of the cessation of a benchmark, Stakeholder consultation will be carried out.



Section 11: Content of the Methodology

CFII describes the Index calculation methodology, Index criteria and additional Index descriptive information in the CFII

Index Guide, which is publicly available at www.yieldbook.com/citi-indices. CFII may also supplement such information

with additional documents such as Index introduction papers which are aimed at providing further details and

explanations to help Index users’ understanding.

CFII strives to provide sufficient information to Stakeholders and Market Participants to foster an awareness of the

construct and methods used to produce the Indices. Stakeholders and Market Participants, however, must determine

the limitations and suitability of an Index when selecting an Index to meet their specific needs.

CFII has also set forth processes and procedures designed to promote consistency and accuracy when producing its

Indices. The Index Design and Maintenance Procedures document states the process for Index design and

maintenance procedures and the data correction process, by which CFII may issue a restatement of index data and

issue an announcement.

CFII maintains an Index Process document, which provides additional details with respect to Index construction, Index

production, data inputs and validation, and the use of Expert Judgment. CFII reviews each Index periodically to gauge

whether the Index continues to adequately represent the intended securities market. During the review, if CFII

determines an Index should be modified or is no longer suitable, the CFIIBC must approve the modification or

discontinuation prior to implementation and notification.



Section 12: Changes to the Methodology

The process for making material changes to an Index Methodology is outlined in the Index Design and Maintenance

Procedures, and involves three phases: discovery, planning and execution. When appropriate and proportionate to the

proposed change, for example when a change is considered to be material to an Index, CFII will survey existing and

potential customers for feedback on the proposed change.

Notification of approved changes to a Methodology is provided to Index users and the public via an Index

Announcement on the CFII website (www.yieldbook.com/citi-indices).

The CFIIBC monitors the all three phases of the process and must approve any changes prior to the execution phase.

The CFIIGC has oversight responsibility and is notified by the CFIIBC of any approved changes.



Section 13: Transition

To discontinue an Index, CFII follows the same process used to make the material changes to an Index Methodology,

which is outlined in the Index Design and Maintenance Procedures and involves three phases: discovery, planning and

execution. When appropriate and proportionate to the proposed discontinuation of an Index, CFII will survey existing

and potential Subscribers for feedback on the proposed discontinuation. Sufficient notification of the Index

discontinuation will be provided to Index users and the public via an Index Announcement on the CFII website

(www.yieldbook.com/citi-indices). Custom Indices produced pursuant to a license agreement would follow the

discontinuation procedures outlined therein.

The CFIIBC monitors all three phases of the process and must approve any Index discontinuation in advance. The

CFIIGC has oversight responsibility and is notified by the CFIIBC of any approved Index terminations.



Section 14: Submitter Code of Conduct

Index levels are determined by CFII from prices provided by Citi trading desks and third-party price providers.

CFII has applied the proportionality principle contemplated by the IOSCO Principles in connection with the Submitter

Code of Conduct, as follows:

1. Third party price providers who provide a generic data service or price dissemination function (i.e., providing

securities prices without regard to the data recipient’s specific intended use and where such information is the

same to all who enter into agreements to receive such data or who access such public data) are not providing

pricing information for the purposes of calculating an Index. Accordingly CFII does not consider these third

parties to be Submitters or their prices to be Submissions.

2. In addition to prices sourced from third party providers, CFII uses prices from Citi traders. The large majority of

trader prices used for Index determinations are made available to address other purposes (e.g., Citi accounting

and market risk measurement) unrelated to CFII. The prices are available on shared systems to multiple

internal users or via communication to group distribution lists without aiming to address any specific intended

use by any particular group, including CFII. As such, Citi traders are not making Submissions to CFII as active

participants in Index determinations. However, a small percentage of instrument prices are provided by Citi

traders solely to CFII. These prices represent less than 3% of all prices collected each month by CFII for the

purpose of Index determination and they often relate to markets for which pricing is otherwise difficult to

source, including from third party vendors. Accordingly, CFII considers that while some of its Indices are

calculated using Submissions from Citi traders, their involvement is peripheral to the process. As such, CFII

considers the risk that Citi traders, as Submitters, can improperly influence the integrity of the Indices to be

low.

3. Separately, Citi intends to implement specific conduct standards for Citi traders who provide prices for use in

Citi Indices. Notwithstanding the low level of risk described above, CFII intends to use these standards and rely

on the Citi compliance control framework around such code of conduct to ensure that all trader originated

prices are accurate and appropriate.

4. Research Affiliates LLC ("RA") fall within the IOSCO definition of "Submitter" in that they are a legal person

providing issuer weights to CFII, used by CFII to calculate certain co-branded indices. CFII does not currently

treat RA as a Submitter for the purpose of the IOSCO Principles as all other key aspects of the determination

process are carried out by CFII and CFII maintains appropriate oversight of RA.


Section 15: Internal Controls over Data Collection

CFII protects the access to the data and tools used in Index production through one or more of the following methods:

i) requiring password authentication when accessing the Index production servers and tools, ii) using control version

software (CVS) to control changes to source code and job scheduling, iii) using industry-accepted methods of

transmission of files, iv) quality assurance testing and approval before invoking changes to programs, and v) logging

and tracking changes to information. To protect the integrity of data used in Index production, access to the production

environment is limited to authorized personnel. Technology-based solutions are implemented wherever practical in the

data collection and transmission process.

The processes for selecting the sources of the data are addressed Sections 7, 8, 9 and 11 of this Statement of

Compliance.


Section 16: Complaints Procedures

CFII has an established Index Complaints Procedures document which sets forth the procedures for handling customer

and vendor questions, comments, and complaints. CFII intends to make these complaints procedures available to all

Index users. Submissions can be made via email [email protected] or by calling the general phone numbers listed in

the CFII Index Guide which is publicly available at www.yieldbook.com/citi-indices.

mailto:[email protected]



Section 17: Audits

CFII, with the guidance of the CFIIGC, has appointed an external auditor to conduct a review of its practices and

compliance with the IOSCO Principles.

CFII expects the first audit to be completed by the end of 2015. CFII intends to work with the auditor to determine the

appropriate extent and periodicity of the regular audits going forward.


Section 18: Audit Trail

CFII retains the data used to produce its Indices by keeping electronic backups of the Index information in accordance

with Citi’s record retention policy. The various tools used for processing, monitoring and updating Index information all

track and preserve information, which includes data values used in Index production, source of the input or data, time,

date, user identification, reason for change or data override, and approval when necessary.

When Expert Judgment is used in Index determination, the action and any values overridden are logged in the

appropriate index production tool. The Index production tools have login authentication that tracks the identity of data

analysts and actions they take in producing the Indices. Inquiries related to Index data, both incoming and outgoing are

tracked using Index production tools. CFII also captures and retains inquires made to the Index Help Desk via email at

[email protected].

CFII is committed to maintaining accurate records of the information used in the construction and publication of the

Indices by controlling and monitoring the sources, inputs, levels and changes.

mailto:[email protected]


Section 19: Cooperation with Regulatory Authorities

CFII is committed to cooperating with relevant regulatory authorities to improve the framework for Index regulation or to

address an inquiry, subject to applicable legal or regulatory restrictions and contractual or confidentiality obligations.

Regulators may contact CFII's responsible officers directly, or the CFIIGC, or the Citi Compliance department

responsible for the oversight of CFII. These groups will appropriately coordinate to ensure any inquiry is diligently

addressed and a sufficient response is delivered.


© 2015 Citigroup Index LLC. All rights reserved. Citi and the Citi and Arc Design are trademarks and service marks of

Citigroup or its affiliates and are used and registered throughout the world.

Your use of, and access to, the Statement is governed by the Citigroup terms and conditions which can be found here

http://www.citigroup.com/citi/terms.html.

This Statement of Compliance with IOSCO Principles (“Statement”) is provided by Citigroup Index LLC (“CitiIndex”) for

the sole purpose of reporting on compliance by CitiIndex with the IOSCO final report on Principles for Financial

Benchmarks and you may not rely on it for any purpose.

Nothing in this Statement constitutes legal, financial or investment advice. For the avoidance of doubt, neither CitiIndex

nor its affiliates or suppliers, or their directors, officers, employees, representatives, delegates or agents accepts any

duty of care or responsibility to the recipient or any other party into whose hands this Statement may come.

Unless with the prior written consent of CitiIndex, this document and its contents may not be reproduced, redistributed,

stored in retrieval system, or passed on, directly or indirectly, to any other person or published, or transmitted by any

other form or means whether electronic, mechanical, photocopying, recording or otherwise in whole or in part.

http://www.citigroup.com/citi/terms.html

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Statement of Compliance with IOSCO Principles · 2015-05-20 · Statement of Compliance with IOSCO Principles | 05 Section 2: Oversight of Third Parties CFII manages all aspects of