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Dow Jones Sells Stoxx Indexes
Deutsche Boerse and SIX Swiss
Exchange announced in November that
they are buying out Dow Jones’ one-third
stake in Stoxx Ltd. for a consideration of
206.1 million euros, or $306 million.
Stoxx was set up as a joint venture
between Deutsche Boerse, Dow Jones
and SIX Swiss Exchange in 1998 in
anticipation of the introduction of the
euro and the creation of the eurozone.
Stoxx is Europe’s leading index provider
in the ETF market and Europe’s
No. 1 (world’s No. 2) provider in the
derivatives market, according to the
company’s Web site. A number of U.S.-
listed exchange-traded funds are tied to
the company’s indexes as well.
Following the transaction’s completion,
which is due to take place in early
2010, Deutsche Boerse will have a
controlling stake in Stoxx of 50 percent
plus one share and will fully consolidate
it for accounting purposes.
In addition, SIX and Deutsche Boerse
will set up a new entity to perform
index calculations, in which SIX will
own 50 percent plus one share.
According to a Stoxx press release,
the transaction will allow both Deutsche
Boerse and SIX to significantly expand
their positions in the international index
business, complementing their established
DAX and SMI index families.
The sale could be a precursor to the
long-rumored sale of Dow Jones Indexes.
The Wall Street Journal reported in
August that News Corp. was considering
selling the venerable index provider,
which has annual revenues of approximately
$130 million to $170 million.
Schwab ETFs Debut
With Competitive Pricing
That soniclike boom you heard at
the beginning of November? That was
the sound made by Charles Schwab’s
entry into the ETF market. It was probably
the most anticipated debut of 2009,
right from the moment that Schwab’s
first filings with the Securities and
Exchange Commission were announced.
Moreover, the fact that a heavy hitter
like Schwab had deemed the ETF arena
worthy of its efforts was, for many, a
sign that the burgeoning industry had
hit its stride.
Although it has more in registration,
Schwab launched just four funds: the
Schwab U.S. Broad Market ETF (NYSE
Arca: SCHB), Schwab U.S. Large-Cap ETF
(NYSE Arca: SCHX), Schwab U.S. Small-
Cap ETF (NYSE Arca: SCHA) and Schwab
International Equity ETF (NYSE Arca:
SCHF). The domestic funds track indexes
from Dow Jones, while SCHF is tied to
the FTSE Developed ex-US Index.
In the days leading up to the launch,
it became clear that the financial services
giant was playing for keeps when
Schwab unveiled the pricing on the
pending ETFs. SCHB and SCHX charge
8 basis points, while SCHA and SCHF
charge 15 basis points. Those fees match
or beat the costs on all the competing
ETFs, even the ones from Vanguard.
But Schwab dropped what might
have been an even bigger bombshell
when it announced the day before
the initial rollout that investors with
Schwab accounts would not face any
commission fees when they traded
the Schwab ETFs. The moves are not
only calculated to draw assets from
established ETFs but also to draw new
investors to the products who might
not otherwise consider ETFs. Dollarcost
averaging, for example, would be
more cost-effective with the Schwab
funds for account holders.
GDP-Weighted Bond Indexes
Provide Alternative
Barclays Global Investors has
launched a new family of gross-domestic-product-weighted
bond indexes, as
investors look for better ways to benchmark
the global fixed-income universe.
BGI isn’t the first to launch GDPweighted
bond indexes. Pimco debuted
its own index in January 2009, and
others are looking at this space for a
number of reasons.
For starters, market-cap-weighted
bond indexes assign larger and larger
weights to countries that borrow
more and more money. This is counterintuitive,
as increased debt may raise
the likelihood of default. In addition,
market-cap-weighted bond indexes typically
underweight emerging markets,
which have less developed bond markets.
Barclays notes that 22 emerging
market countries account for just 15
percent of global GDP, but form less
than 0.7 percent of the Barclays Global
Aggregate Bond Index by market value.
Barclays’ new GDP-weighted index
family includes the following flagship
products:
• Global Aggregate GDP
Weighted Index
• Global Treasury GDP
Weighted Index
• Global Treasury Universal Index
In each variation, the methodology
leads to a significant underweight in
Japan and a correspondingly higher
allocation to countries like the BRICs,
Mexico, Taiwan and other emerging
markets.
INDEXING DEVELOPMENTS
FTSE Launches Currency Family
In September, FTSE launched a new
family of currency indexes, the FTSE
Currency Forward Rate Bias (FRB) Index
Series. The first indexes in the series
to debut were jointly developed by
FTSE and currency overlay firm Record
Currency Management.
The FTSE Currency FRB5 indexes cover
the 10 currency pairs that can be formed
from the U.S. dollar, euro, Japanese yen,
pound sterling and Swiss franc. Each
index seeks to represent the performance
of the carry trade (or forward-rate bias
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January/February 2010