The Spaulding Group, the leading performance measurement service firm in the money management industry, today announced the launch of the “Custodian Guidelines for Transparency in Benchmark Cost” in partnership with BNY Mellon, State Street and Northern Trust. The “Guidelines” were developed with the goal to improve transparency on embedded fees for benchmark data, and enable investors to make informed decisions by understanding the details behind the fees they are paying.

“The ever-increasing cost of benchmark data has been an issue that has grown in importance every year. It has been a major theme of our Performance Measurement Forums, and a hot topic of discussion at our annual Performance Measurement, Attribution and Risk conferences and in our surveys,” said David Spaulding, Founder and CEO of The Spaulding Group.

The Spaulding Group worked closely with three participating custodian banks to create a set of principles that the industry should abide by in order to increase awareness of the costs associated with indexes. This list of best practices is designed to lead to further efficiencies in the asset management industry by ultimately lowering fees paid by end-clients, predominantly asset owners.

In conjunction with the adoption of the “Guidelines," Nasdaq has agreed to license its Nasdaq Global Index Family at no cost to custodian banks that abide by the guidelines set forth by The Spaulding Group and will be offered by BNY Mellon, State Street, and Northern Trust as a low-cost reporting option.

Banks can join by publicly acknowledging they will abide by the principles that have been outlined.

“As the industry examines the fees associated with benchmarks, Nasdaq is focused on providing low-cost indexes that span geographies and asset classes,” said John Jacobs, Executive Vice President, Global Information Services at Nasdaq. “We are excited to offer our Global Index Family to these custodian banks, as they work to increase transparency on the cost of index data. We applaud the work done by The Spaulding Group, BNY Mellon, State Street, and Northern Trust to bring this key issue to the forefront of the asset management industry.”

A whitepaper focused on benchmarks will appear in the Spring issue of The Journal of Performance Measurement, co-authored by The Spaulding Group, BNY Mellon, State Street and Northern Trust.

For more information on the Spaulding Group’s “Guidelines for Transparency in Benchmark Cost," and full transcript of the custodian bank interviews, click here. To be contacted by a member of our team, please click here.
 

Effective September 22, 2014, NASDAQ OMX will launch 234 additional indexes as a result of our semi-annual evaluation of the NASDAQ Global Indexes.

The comprehensive NASDAQ Global Index Family^SM covers international securities segmented by geography, sector, and size. The NASDAQ OMXtransparent and rules-based selection method results in a complete representation of the global investable equity marketplace. The indexes cover 45 individual countries within Developed and Emerging Markets, and facilitate a multitude of tracking, trading, and investing opportunities. 

The NASDAQ Global Index (NQGI) benchmark provides broad exposure for more than 98% of investable large-, mid-, and small-cap securities. The family is further broken down across segments, regions, countries, sectors, and capitalization size. Our free float-adjusted, market cap-weighted methodology utilizes ICB classifications–resulting in indexes calculated as Price Return, Total Return, and Net Total Return.

As explained in the index methodology, the NASDAQ Global Indexes are evaluated semi-annually in March and September. Following the initial evaluation upon launch of the Global Index family, any indexes that contained less than five Index Securities were not launched. After the September evaluation of the index family, 234 of these indexes have met the index methodology requirements and will be launched on Monday, September 22, 2014.
For more information, please contact indexdatasales@nasdaqomx.com.

The entire NASDAQ Global Index Family is now accessible world-wide on Quandl, a leading open platform for financial and economic data on the internet. This makes NASDAQ OMX the first leading index provider to distribute its proprietary index level performance information on Quandl’s site, in a completely free, transparent and downloadable form.

“Providing easy, user friendly, flexible access to our data is a guiding principle of the NASDAQ Index Elite Partner Program,” said Oliver Albers, Head of Sales for Global Information Services. Quandl, trusted by thousands of professionals as a reliable data source, is the next generation data distribution model for financial services and we are excited to work with them to ensure all investors have the capability to access our high-quality index content.”

Via the Quandl platform, the entire NASDAQ Global Index Family will now be accessible directly from Excel, R, Python, Matlab and many other tools, as well as through a free and open API.

“We are very excited to join NASDAQ Elite Index Data Partner program. This partnership is fantastic for our 100,000 monthly users who now have access to a comprehensive suite of indexes from one of the world’s premier index providers,” said Tammer Kamel, CEO of Quandl. “NASDAQ’s coverage is total, giving Quandl users a complete index solution.”

J.P. Morgan, one of the world’s leading depositary receipts (DR) banks, has re-launched ADR.com, an enhanced portal for investors and issuers. ADR.com will better serve Depository Receipt (DR) market participants by providing issuer clients, investors, brokers, and investment advisers the tools to monitor DR trading activity and discover international investment opportunities. It is the first public website to visually illustrate dynamic views of the NASDAQ Global Index Family, alongside other exchange and market data.

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, explains the advantages of being a part of a global exchange.

Transcript: The fact that NASDAQ Global Indexes is part of the NASDAQ OMX Exchange company gives us some great advantages. For example, since we power 75 markets around the planet, we have natural inroads and connections to those markets that allow us to reach those market participants and they, in turn, are the gateway to the investors. That’s why you’ve seen NASDAQ OMX Indexes, like the NASDAQ-100, for example, start being launched in ETFs and other kinds of products around the planet. We’ve got access to the local marketplace through those connections. In addition, those markets are operating on our trading technology, which is the basis for our index technology. So, again, we have a natural conduit to be able to partner in local markets. The other advantage of being a part of this exchange company is that NASDAQ OMX owns a variety of derivative exchanges, those in Europe and in the US, where we are the number one options market, for example. And when we go to ETF sponsors and other product sponsors, and we can say, “look, if you pick our index, versus another indexers benchmark, we can guarantee you that, if it’s options eligible, we will get an index option launched on your product.” And we’ve all seen that the most successful products out there are the ones that have a variety of different products on them. So you take an index, you launch an ETF and an option, and a future, and structured products, and it appeals to a wide variety of investors and traders. That ensures the most success for all the products. They don’t really compete, they are complementary. So, again, being part of this larger family, gives us great opportunities to leverage the assets of this overall company.

NASDAQ OMX announced the following 21 NASDAQ Indexes are now available to clients of Informa Investment Solutions' Zephyr StyleADVISOR. They will also be launched within Informa Investment Solution's PSN Enterprise in the coming months. Eighteen of the indexes are within the NASDAQ Global Index Family, and are comprised of nearly 9,000 global securities with a combined $41.8 Trillion float-adjusted market cap.

• NASDAQ Developed Ex North America Index
• NASDAQ Developed Ex North America Large Mid Cap Index
• NASDAQ Developed Market Index
• NASDAQ Developed Large Mid Cap Index
• NASDAQ Developed Small Cap Index
• NASDAQ Emerging Markets Index
• NASDAQ Emerging Large Mid Cap Index
• NASDAQ Emerging Small Cap Index
• NASDAQ Global Ex US Index
• NASDAQ Global Ex US Large Mid Cap Index
• NASDAQ Global Index
• NASDAQ Global Large Mid Cap Index
• NASDAQ Global Small Cap Index
• NASDAQ US Large Cap Index
• NASDAQ US Mid Cap Index
• NASDAQ US Small Cap Index
• NASDAQ US Benchmark Index
• NASDAQ US Large Mid Cap Index

The remaining three indexes are from the NASDAQ Dividend Achiever family - a robust series of income-oriented indexes tied to exchange traded products (ETPs) that track nearly $20 billion in assets under management (AUM).

• NASDAQ US Dividend Achievers Select Index
• NASDAQ US Broad Dividend Achievers Index
• NASDAQ Dividend International Achievers Index

NASDAQ OMX Global Indexes is partnering with StatPro Group to offer all StatPro Revolution clients access to NASDAQ’s complete suite of more than 40,000 indexes in the NASDAQ Global Index Family.

In an unprecedented move in the index data space, StatPro Revolution’s App Store, which will feature the NASDAQ indexes on a constituent and total level, will allow clients the opportunity to buy benchmark data on a per portfolio basis. This means that smaller asset managers and individual investors now have access to deeper insights at a significantly lower cost.

NASDAQ’s Index Level Performance available in StatPro Revolution can be redistributed by downstream clients in their own reports without the need for a direct license or associated fees. This enables investor communications without incurring additional fees for reporting rights, typically charged by other benchmark providers.

With this partnership, StatPro is one of NASDAQ OMX’s Elite Data Vendors.

By Justin Wheatley, Chief Executive, StatPro Group

This op-ed was originally published in Inside Market Data on July 7, 2014.

As index use has grown, so have the ways in which entrenched index providers are extracting revenues from licensing their indexes and underlying data. But with cost still a key concern, with the popularity of exchange-traded funds growing, and with incumbents facing fresh competition, the industry may be ripe for change, says StatPro group chief executive Justin Wheatley

It is a remarkable phenomenon how much money is spent these days on index data. Indexes started off as a humble measure of roughly how well a stock market was performing. Today, there are millions of indexes available. Fund management companies must buy the licences to use these indexes to measure their performance, and they pay handsomely for this privilege.

Over the years, index providers have generally become more and more aggressive about how their indexes are licenced, seeking out additional licencing fees for every possible usage. Over the 20 years I have worked in the industry, I have rarely heard anyone that was happy about the cost of their index supply. There is a perception that companies are trapped and forced into paying excessive fees for little perceived value-add, despite the best attempts of index providers to demonstrate how unique and useful their particular indexes are.

To a certain extent, it is puzzling how index providers can charge so much. If a supplier of a product keeps raising its price and enjoys significant net margins (over 80 percent, in some cases), you would expect competition to join the fray and drive down prices to a normal and reasonable level—especially if the product is easy to imitate. Well, indexes are indeed very easy to imitate, and competitors have popped up everywhere, sometimes even offering indexes for free. Yet the leading providers of index services have seen no drop in business—in fact, they have grown even faster. So the success of the incumbents has nothing to do with the uniqueness of their products (some rival indexes have a 99.99 percent correlation with the leading index), but rather something else.

The new market for exchange-traded funds (ETFs) has also been a boon for index providers, as would-be sellers of ETFs have launched numerous funds pegged to indexes. Fund management companies pay significant sums for the right to offer such products as the S&P 500 ETF, the FTSE 100 ETF or the MSCI World ETF, as it helps sell their ETFs better, even though they could easily produce an ETF based on a low-cost index.

Brand Management

So it is evident that the index business is not only about the computation of a benchmark, but is also an exercise in brand management. Fund managers make a lot of money managing other people’s investments. Their top priorities are reputation and trust. By using a recognizable brand name as a benchmark index, they can gain and maintain trust with their clients. This brand effect is the real reason why the leading index providers do so well. It is also noteworthy that some providers are strong in equities and others in bonds. Some are well known for a particular market or region, like emerging markets, but none are used for every type of investment, even though many cover everything. Once an index provider is established as the leader in a given niche, it is hard to unseat them, as they have the trust of the market.

Brand name and trustworthiness are important to retail and institutional investors alike. The institutional investors are the guardians of pension funds and insurers deposits, who parcel out their capital to be managed by different fund managers. They are in turn advised by professional consultants whose job it is to keep the fund managers honest. These consultants want to benchmark the fund managers against indexes to ensure that their performance is up to scratch, and this process has contributed to the growth of indexes.

Say a consultant recommends an index to measure the fund manager. The fund manager has no choice but to use this index and then manage their money relative to this benchmark. Once embedded, this index is nearly impossible to replace, and this in turn allows index providers to raise fees without fear of cancellation. As certain index providers become the “leaders,” it takes a brave consultant to recommend a new, cheaper index provider.

The index world is an entrenched business. The fees of index services are initially paid by the fund managers, but they simply pass the fees on to their clients. So in the end, it is pensioners and investors who pay. Indexes have become a hidden tax.

So, despite this unhappy outlook, it is pleasing then when companies try to break the near-index monopoly that exists. Nasdaq OMX has recently launched a big campaign to provide a new class of global equity indexes that are nearly identical to other famous indexes, but at a fraction of the price. Using its technology, Nasdaq has built an index calculator that can easily create thousands of indexes at a much lower cost than their competitors. Nasdaq also has a world-famous brand, and should leverage this to gain market share.

Another is the Freedom Index, an independent, not-for-profit index provider, set up with the express intent of providing free indexes (it does accept donations, however, and StatPro makes a financial contribution to funding the Freedom Index, and also supplies it with data to compute its indexes), and providing a high-minded attempt to make the incumbents more reasonable. While the Freedom Index is tiny and has no brand to speak of yet, its worthy desire to do the right thing should enable it to gain support easily, and brands are best built through reputation, rather than simply marketing.

Both low-cost alternatives like Nasdaq OMX, and free providers like Freedom Index are expanding their coverage, and plan to one day be major providers of index data. Consultants would be advised to take a look and save their clients and pensioners a packet of money while being every bit as good as any other index provider.

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the Importance of Value and Price in the Index Data Business in the third installment of his video series.

Transcript: I absolutely think indexers will compete more on price in the future. I think the bigger question is less about price and more on value. So as we’ve mentioned before, indexers, modern indexers are moving toward; full-service ones have to be multi-asset class and it has to be a scalable model, not just a technology scalable model, but a scalable model across every facet of what they do. You have to be nimble and lean when it comes to index administration, and operations and when it comes to rolling out your data in a variety of different formats. NASDAQ OMX, as part of the NASDAQ OMX Group, NASDAQ Indexes has always been a very efficiently built organization. Our goal is that the next 10,000 indexes, shouldn’t cost the same as the first 10,000 indexes. So we are continuing to roll out a superior set of indexes with an additional value proposition at the lowest possible cost. And cost matters to all the downstream users of indexes, so we are absolutely committed to being the low cost provider of indexes, data, components and performance to all the users of indexes downstream. So, I think, you’re going to see more and more, as you see in the environment with some of the ETF providers today, looking and switching benchmarks out to find ones that can give them, probably, better cost structures and certainty of the pricing of their products. We are absolutely going to continue to drive to be the low-cost index provider.

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the Importance of Scalable Technology in the second installment of his video series.

Transcript: To be a full service index calculator, and the world is moving to a smaller number of much larger full-service index calculators or indexers, you need a robust calculator. This business is moving to a model that’s built on scale, a technology scale. That is a strong spot of the NASDAQ OMX Group and we built the most scalable technology to trade securities around the planet. Now I say securities specifically, not just stocks, because we power a variety of different kinds of markets. So when it comes to an index calculation, you need to be able to calculate a variety of indexes across multiple asset classes; Not just equities, but commodities, you need to be able to do currencies, you need to be able to do fixed income and a variety of other things. It needs to be fast, it needs to be able to take in multiple data inputs, and it needs to be able to deliver that in a very robust data center that can be consumed by investors a lot of different ways. You can’t build that with a very expensive cost structure, it won’t be competitive. So that is the importance of having a technologically scalable index calculator at the core of your index business and we are very excited that we have built what we consider the absolute state-of-the-art best one on the planet.

NASDAQ OMX has added BondEdge Solutions, an Interactive Data company and provider of high-quality cross-asset portfolio management and risk analytics solutions, to the NASDAQ Elite Index Data Partner Program. BondEdge will distribute the NASDAQ Global Index Family value data to its customers, immediately upon distribution from NASDAQ OMX. As part of the index launch, Bondedge is providing their clients with free access to NASDAQ’s suite of Global Equity Indexes through August 2014 to help them evaluate the offering.

The NASDAQ Global Index Family covers international securities segmented by geography, sector, and size. NASDAQ OMX’s transparent and rules-based selection method results in a complete representation of the global investable equity marketplace. The indexes cover 45 individual countries within developed and emerging markets, and facilitate a multitude of tracking, trading, and investing opportunities.

For more information about BondEdge, please visit www.bondedge.com.

The following article was written by Faye Kilburn and published in Inside Market Data on April 7, 2014.

Though there are almost a hundred mainstream index providers in the industry today, the market remains dominated by a small and elite group of providers—MSCI, S&P Dow Jones Indices, Russell Indexes and FTSE Group. With the industry clamoring for change and innovation, Faye Kilburn examines the barriers to greater adoption of alternative providers. The fees charged by index providers have risen sharply over recent years, partly due to the increase in complexity of indexes for benchmarking, and partly due to the rise of exchange-traded funds. These hikes, combined with the proliferation of new license types covering areas such as non-display usage, have led many firms to question whether the current cost of indexes is at all reflective of their value.

Read the entire article here. 

The NASDAQ Global Index Family, comprised of nearly 9,000 global securities with a combined $41.8 trillion float-adjusted market capitalization, is now available on the award-winning RIMES Benchmark Data Service® (RIMES BDS®).

This offering expands upon the following NASDAQ indexes previously available on RIMES:

• NASDAQ OMX Nordic/Baltic Indexes
• NASDAQ Commodity Indexes
• NASDAQ/PHLX Indexes
• NASDAQ Green Economy Indexes
• NASDAQ Dividend & Income Indexes
• NASDAQ OMX Nordic Fixed Income Indexes
• NASDAQ Axioma Equity-Commodity Indexes

RIMES Technologies Corporation was the first provider to become a NASDAQ OMX Elite Index Data Partner

“Furthering our partnership with RIMES provides their clients access to NASDAQ OMX’s full range of global equity indexes to benchmark their portfolios; responding to client demand for competing benchmark options,” said Oliver Albers, VP of Sales for Global Data Products, NASDAQ OMX.

RIMES Benchmark Data Service formats NASDAQ Index Data according to clients’ specific criteria, then delivers it through files customized to fit each client’s systems, ready to be used within their applications. RIMES BDS is fully managed data service that covers all the elements of good data processing.

“The data from NASDAQ OMX Global Indexes furthers our commitment to providing the full suite of data for all NASDAQ OMX indexes, customized to our client’s exact specifications,” said Alessandro Ferrari, SVP Global Marketing, RIMES. “These additional indexes improve clients’ access to NASDAQ Indexes and supplement their existing choice of indexes.”

Learn more about NASDAQ OMX Elite Data Index Partners.

This week, NASDAQ OMX Global Indexes Research, debuts a new kind of analytics report, called Index Snapshot. These new pieces will be published right here on the Global Index Watch site on a weekly basis. Today's report explores the NASDAQ OMX Global Regions - North America, Latin America, Europe, ASPA and Middle East/Africa.

Download Index Snapshot: Global Regions now to see how each region performed in September 2013.

We have extended the offer for all Factset clients to receive free access to the NASDAQ Global Index Family. Factset clients now have through September 30, 2013, to browse and utilize the information at no cost.

The NASDAQ Global Index Family covers 98% of the investible equity marketplace in large-, mid-, and small-cap stocks across Developed and Emerging markets.

“FactSet is pleased to add the NASDAQ Global Index family to our Global Indexing and Benchmark offering,” says Patrick Locke, Vice President, Database Development, FactSet. “This release combines NASDAQ OMX’s Global sector, benchmark and tradable indexes with FactSet’s analytical tools to let clients benchmark and track a broad representation of the global investable marketplace.” Contact us for more information.

Product sponsors, portfolio managers and other market participants now have even more choices when it comes to benchmarks for Global Equities. The NASDAQ Global Index Family is now calculated in USD, AUD, CAD, EUR, GBP, JPY and select local currencies to better meet the needs of the financial community. Totaling over 25,000 indexes, the complete family includes approximately 9,000 securities broken down by market segment, region, country, size and sector. Our rules-based selection criteria ensure that the family is a transparent and investable benchmark for the global equity market.

A differentiator from other global equity offerings is NASDAQ OMX’s segment designation process: NASDAQ OMX first determines and assigns all countries that fall within the Developed Markets segment. Countries that do not qualify for the Developed Markets segment are then reviewed using the criteria for Emerging Markets. View the methodology to learn more about our quantitative and qualitative approach.

"The expansion of the NASDAQ Global Index Family into various currencies underscores our premier global index operation," said NASDAQ OMX Executive Vice President John Jacobs. "We recognized the need for cost-effective benchmark alternatives in multiple currencies. With the addition of these indexes, market participants can more effectively gauge and manage currency exposure as they track global equities."

View the press release.

Effective June 27, 2013, the Financial Industry Regulation Authority (FINRA) will designate the NASDAQ Global Large Mid Cap Index to serve as an additional index for purposes of calculating position limits on conventional equity options overlying foreign securities, subject to the volume and float criteria outlined by FINRA in Rule 2360. FINRA determined that the designation of this additional index is consistent with the designation of the currently utilized FTSE All-World Index in that the indexes are of similar geographic dispersion and composition including market capitalization sectors of large and mid-cap companies. The NASDAQ Global Large Mid Cap Index is a free-float adjusted market capitalization weighted index designed to include 90 percent of the investable public equity in certain developed and emerging countries, subject to a semi-annual rebalancing schedule.

For more information, refer to the FINRA Regulatory Notice, contact NASDAQ OMX Global Indexes at +1 301 978 8284 or contact NASDAQ OMX Transaction Services U.S. - Derivatives at +1 800 846 0477 (Option #2).

Are you a pension consultant looking for a viable alternative to the expensive, well-known industry benchmarks? What if you could provide a new way of saving your clients money without sacrificing reliability and accuracy? We’ve been talking to managers and custodians across the globe and the sentiment is the same — show us some lower cost alternatives that we can trust and help bring fee transparency to investors.

We have done just that. We’ve used our world-renown INET technology to make our reliable, objective and transparent indexes more affordable. Check out our NASDAQ Global Index Family, NASDAQ Dividend and Income Family and the NASDAQ Commodity Index Family and see how they compare to industry incumbents.

Click here for more information specifically for Pension Consultants and learn how NASDAQ OMX is yet again using cutting-edge technology to offer high-quality, lower-cost solutions that are reshaping the market.

All Factset clients now have access to the NASDAQ Global Index Family, covering 98% of the investible equity marketplace in large-, mid-, and small-cap stocks across Developed and Emerging markets.

From now until August 31, 2013, all Factset customers have access to this data for FREE.

“FactSet is pleased to add the NASDAQ Global Index family to our Global Indexing and Benchmark offering,” says Patrick Locke, Vice President, Database Development, FactSet. “This release combines NASDAQ OMX’s Global sector, benchmark and tradable indexes with FactSet’s analytical tools to let clients benchmark and track a broad representation of the global investable marketplace.” Contact us for more information.