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Horizons Crude Oil Rolling Futures Index (CMDYCLER)

Overview

The Horizons Crude Oil Rolling Futures Index (the “Index”) is designed to provide accurate returns that mirror the holding of the underlying commodity and in so doing, represent a liquid benchmark for investors that desire an exposure to that underlying commodity.

The Index is calculated based on daily returns of a Daily Contract Settlement Price of the WTI Crude Oil for the Designated Relevant Contracts.

The Index is a proprietary index owned and operated by Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”).

Horizons ETFs has the discretion to change the Primary Contract, Secondary Contract and Roll Methodology of the Index in response to the then market conditions, while seeking to maintain exposure to as close to the Prompt Contract. Please refer to the defined contract terms below.

Bloomberg Code

The following index will be tracked on a daily basis and reported on Bloomberg no later than 6:00 PM Eastern Time on each Business Day.

CMDYCLER<Index> WTI Crude Oil futures (“CL”)

Prompt, Primary, and Secondary Contracts

Index Code (Bloomberg)

Underlying Commodity Contract

 

The Horizons Crude Oil Rolling Futures Index, Bloomberg Ticker: CMDYCLER, tracks the WTI Crude

Oil futures (“CL”). The Prompt Contract refers to the CL futures contract that is closest to expiration

and is usually for delivery in the next calendar month. For the purposes of calculating CMDYCLER,

the Primary Contract is the contract that will be used at the beginning of each calendar month. The

index rolls into the Secondary Contract as described in the section “Index Contract Roll Period and

Weights” below.

For more detail, please refer to the Contract Roll Period and Weights Section below.

Month Begin Date

Prompt Contract

Primary Contract

Secondary Contract

January G February H March J April K May M June N July Q August U

K M M N N Q Q U U V V X X Z Z F F G G H H J

J K

    

September October November December

CL Month Codes

V X Z F

     

Month

Month Code

Month

Month Code

July N August Q March H September U April J October V May K November X June M December Z

January F February G

       

Index Contract Roll Period and Weights

The Roll Date from the Primary Contract to the Secondary Contract in the Index will be on the day that the Prompt Contract expires provided that the Prompt Contract expires on a Business Day as defined below. If the Prompt Contract expires on a non-Business Day, then the Primary Contract will roll to the Secondary Contract on the next Business Day following the expiry date. For the purposes of the Index, a Business Day is defined as any day in which all of the following are true: (i) the CL futures contracts are trading and there is a published Contract Settlement Price for the Prompt, Primary, and Secondary Contracts; (ii) the Toronto Stock Exchange (“TSX”) is open and publishes closing prices; and (iii) a day where both CAD and USD can settle. The determination of the appropriate Primary and Secondary Contract is based on the day of the month and is based on the rules below:

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Business Day

Contract Weight at End-Of-Way

Days 1- Prompt Expiry Date
Prompt Expiry Date
Prompt Expiry Date through remainder of month

Market Disruption Events

100% Primary, 0% Secondary 0% Primary, 100% Secondary 0% Primary, 100% Secondary

 

From time to time, market disruption events may occur that will result in the postponement of the Index and/or the adjustment of the roll period. A Market Disruption Day will be deemed to have occurred if any of the following events occur:

1. The Daily Contract Settlement Price is not published by 4:00 PM, Eastern Time;

2. The Daily Contract Settlement Price is erroneous, in the reasonable judgment of Horizons

   ETFs, and such error is not corrected by 4:00pm, Eastern Time;

3. The Daily Contract Settlement Price is a Limit price; or

4. Trading in the relevant contract is disrupted during the trading day and does not trade for at

   least 30 minutes prior to the scheduled closing time (or rescheduled closing time if the contract

   closing time is rescheduled).

If any of these events occur on a non-roll date, the Index will not be posted for that Business Day.
If any of these events occur on a roll date, the Index will not be posted for that Business Day AND the roll that was to take place on the Market Disruption Day will take place on the next non-Market Disruption Business Day. For instance, if the Market Disruption Day occurred on expiry of the Prompt Contract, the roll that was to take place that day will take place on the next non-Market Disruption Business Day.

Index Calculation

The following explains, in detail, how the CMDYCLER Index is to be calculated on a daily basis.
t The index of time for the life of the transaction, from the first day ( 0 ) to the last day ( T ).

t ∈ I | t ∈ [ 0, T ]
a The index for “throughout trading day” ( 0 ) and “end of trading day” ( 1 ).

a ∈ I | a ∈ [ 0, 1 ]
n The index for the commodity contract, where the “Primary contract” ( 0 ) and the “Secondary

contract” ( 1 ) are the only ones contemplated. n ∈ I | n ∈ [ 0, 1 ]

      

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m The number of days that the futures contracts are rolled from the front month to the next month. The number of days contemplated for this index is 1 day.

m ∈ I | m ∈ [ 0, 1 ]

qn(t,a) The percentage of the commodity index explained by contract “n” on day “t” at timestep “a”. The sum of the percentages for all “n” must equal one. Before the roll period, q1(t,1) is equal to one and q2(t,1) is equal to zero. During the roll period, q1(t,1) is equal to q1(t,0) less 1/m and q2(t,1) is equal to q2(t,0) plus 1/m for each of the “m” days. For the remainder of the month after the roll period, q1(t,1) is equal to zero and q2(t,1) is equal to one.

qn(t,a) ∈ R | qn(t,a) ∈ [ 0, 1 ]
vn(t,a) The quantity of futures that would be invested in Cn(t) if it were solely invested in that

        

contract. The following is true: vn(0,1) ∈ R | U(0,0) / Cn(0)
vn(t,0) ∈ R | vn(t,0) = vn(t-1,1) vn(t,1) ∈ R | vn(t,1) = U(t,1) / Cn(t)

; t = 0 ; t > 0 ; t > 0

 

Cn(t) The closing value of the listed commodity contract “n” on day “t”. Please note that the actual contracts will change as they get rolled. This is a market-observed factor.

U(t,a) The value of the commodity index on day “t” at time step “a’’. Please note that the value of the index is unchanged for a given day “t” for either of the two time steps to observe the conservation of value as measured using closing prices of the listed commodity contracts.

The index value is the weighted summation of the “front contract” and the “next contract”.

The Index

The formula to determine the Index is as follows: U(t,a)= q0(t,a)×v0(t,a)×C0(t) + q1(t,a)×v1(t,a)×C1(t)

The initial condition of the index is as follows: U(0,0)=100

The rebalancing equations of the index are as follows:

U(t,0)= q0(t,0)×v0(t,0)×C0(t) + q1(t,0)×v1(t,0)×C1(t) U(t,1) = q0(t,1) ×v0(t,1) ×C0(t) + q1(t,1) ×v1(t,1) ×C1(t)

U(t,1) =U(t,0)

    

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Changes to the Index

From time to time, and as market forces dictate, it may become necessary for Horizons ETFs and/or the Calculation Agent to change this index methodology (the “Index Methodology”) as explained in this document. Changes may include, but will not be limited to, roll period adjustments, market disruption events, and Designated Relevant Contracts. Horizons ETFs will attempt to give as much notice as possible of any changes that may occur.

Neither this Index Methodology nor any set of procedures are capable of anticipating all possible circumstances and events that may occur with respect to the Index and the methodology for its composition, weighting and calculation. Accordingly, a number of subjective judgments must be made in connection with the operation of the Index that cannot be adequately reflected in this Index Methodology. Further, modifications to the methodology to calculate the Index, and consequently the Index Methodology, may be necessary from time to time. The Calculation Agent reserves the right to make such changes or refinements to the methodology set forth in this Index Methodology as it believes necessary in order to preserve and enhance the utility of the Index as a benchmark for commodity market performance. The Calculation Agent also reserves the right to take such action with respect to the Index as it deems necessary or appropriate, in order to address market emergencies or other extraordinary market events or conditions. Wherever practicable, any such changes or actions will be publicly announced prior to their effective date.

Disclaimer

The data and information presented of the Index (the “Information”) reflects the methodology for determining the composition and calculation of the Index. This Index Methodology, the Information and the Index are compiled and published by Horizons ETFs.

The Information is solely for your internal use and may not be used as the basis of any product, or reproduced, redistributed or transmitted in whole or part, in any form or by any means, electronic or mechanical, including photocopying, or any information storage or retrieval system, without the express prior written consent of Horizons ETFs. The Information is for your private information and use and is not intended, and should not be construed, as an offer to sell, or a solicitation of an offer to purchase, any securities or other financial instruments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Any information relating to the tax status of financial instruments discussed herein is not intended to provide any tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. Prior to entering

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into a transaction you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you deem necessary to make your own investment, hedging and trading decisions.

Each of Horizons ETFs and the Calculation Agent and their respective affiliates and their respective officers, directors and employees may have positions or engage in transactions in securities or other financial instruments based on or indexed to or otherwise related to the Index.

Neither Horizons ETFs nor the Calculation Agent shall have any liability, contingent or otherwise, to any person or entity for the quality, accuracy, timeliness and/or completeness of the Information, the Index or any data included in this Index Methodology, or for delays, omissions or interruptions in the delivery of the Index or data related thereto. Neither Horizons ETFs nor the Calculation Agent makes any warranty, express or implied, as the results to be obtained by any person or entity in connection with any use of the Index, including but not limited to the trading of or investments in products based on or indexed to or related to the Index, any data related thereto or any components thereof. Neither Horizons ETFs nor the Calculation Agent makes any express or implied warranties, and hereby expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Information, the Index or any data related thereto. Without limiting any of the foregoing, in no event shall Horizons ETFs or the Calculation Agent have any liability for any special, punitive, indirect, or consequential damages (including lost profits), in connection with any use by any person of the Index or any products based on or indexed to or related thereto, even if notified of the possibility of such damages. Neither Horizons ETFs nor the Calculation Agent is an advisor as to legal, taxation, accounting, regulatory or financial matters in any jurisdiction, and is not providing any advice as to any such matter.

This document is published by Horizons ETF’s. All rights reserved. Horizons ETFs does not undertake to advise you of changes in the information contained in this document.

This document has been prepared solely for informational purposes based upon information generally available to the public from sources believed to be reliable. Neither Horizons ETFs nor the Calculation Agent makes any representation with respect to the accuracy or completeness of this report, the content which may change without notice. The methodology involves rebalancing and maintenance of the index that are made periodically during each year and may not, therefore, reflect real time information. Each of Horizons ETFs and the Calculation Agent disclaims any and all liability relating to this report and makes no express or implied representations or warranties concerning the accuracy or completeness of this report. Historical results should not and cannot be viewed as an indicator of future results.

No portion of this document may be reproduced in any format or by any means including electronically or mechanically, by photocopying, recording or by any information or retrieval system, or by any other form or manner whatsoever, without the express prior written consent of Horizons ETFs.

Analytic services and products provided by the Calculation Agent are the result of separate activities designed to preserve the independence and objectivity of each analytic process. The Calculation Agent has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process.