SFE and DJI Create Indexes

January 01, 1999

In December 1998, Dow Jones Indexes and the Sydney Futures Exchange (SFE) announced joint ventures to develop a new set of investable equity indexes and debt and commodity indexes with associated futures contracts.

The new equity indexes will be known as the Asia Pacific Extra Liquid Series (AP/ELS). They are a set of specially constructed regional-, country-and sector-specific indexes directed at equity market participants seeking index-related investments in the Asia Pacific region. Dow Jones and the SFE intend to develop a line of products based on these indexes for both institutional and retail consumers.

The SFE will begin introducing AP/ELS futures and options contracts based on regional equity markets in the second quarter of 1999 when the first of the new indexes are expected to be launched. These will be followed by warrants and exchange-traded funds on the same indexes.

However, the regional stock markets that will underpin the indexes haven't yet been chosen, SFE and Dow Jones Indexes officials said. That will be decided sometime in 1999, after consultations with fund managers and other market participants.

A week after the AP/ELS was announced, the SFE disclosed its plans to create debt and commodity indexes for the Asia-Pacific Region.

"Given some of the debt indexes are already perceived to be inefficient, we are going to create a whole family of debt and equity indexes based on a common calculation methodology," Leslie Hosking, chief executive of the Sydney Futures Exchange, said.

He added that because debt markets are less transparent than equity markets, debt indexes aren't as easy to construct. However transparency is improving, thanks in part to the spread of electronic trading around the world, Hosking said, and he singled out the Japanese and Australian debt markets as likely to be the SFE's first two targets. Hosking noted that Hong Kong and Singapore, among other centers, have expressed interest in indexes for their fixed-interest sectors too because they felt it would help development of the capital markets there.

After debt, SFE will consider futures contracts based on indexes of commodities, a sector less transparent than either equity or debt, said Hosking. That may include various sectors of the commodity market, or various grades of commodities within a sector.

 

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