Nasdaq’s Jacobs: Smarter Beta In Demand

March 05, 2012

Nasdaq is ready to serve up increasingly sophisticated indexes as the ETF market moves beyond pure-beta funds.

 

Nasdaq, the No. 2 U.S. stock exchange and a growing presence among of index providers, hosted a one-day conference at its New York headquarters last week with data provider Rimes Technologies to take measure of the changing landscape of indexing.

At the event, IndexUniverse Correspondent Alex Ulam caught up with John Jacobs, the executive vice president for Nasdaq Omx’s Global Index Group, to discuss the growing appetite for ‘smart beta” indexes as the $1.2 trillion juggernaut of U.S.-listed ETFs continues to gather momentum.

 

Ulam: I was talking with a former Nasdaq employee and who said that initially Nasdaq hadn’t moved that aggressively into the ETF indexing space.

Jacobs: I don’t know how to answer that. We are probably the fifth- or sixth-largest indexer for ETFs on the planet. We have 70 indexes.

Ulam: Are there certain parts of the world where you have better penetration than others?

Jacobs: We have more products in the U.S.; then Europe is second; and Asia is third. But in the last 18 months we have launched Nasdaq products in Korea, Japan and China. We also have a smaller fixed-income business in the Nordic countries and we just launched U.S. Treasurys indexes, so we are adding to our index mix and getting more and more business.

Ulam: Global X recently switched its China Technology ETF (NYSEArca: QQQC) to a Nasdaq index. Some people I spoke with said a reason for that sort of change is that Nasdaq has better penetration with Chinese companies, and that more Chinese companies are listed on Nasdaq exchanges.

Jacobs: We are an index company, and one of our advantages is that we also own a bunch of stock exchanges—so we have great insights there. And we also are a technology company that buys technology around the world. So Nasdaq has global access.

When you come to Nasdaq and pick one of our indexes to launch an ETF in the U.S., we can also launch options because we own the biggest options market in the U.S. So we do things that other indexers don’t do.

Ulam: So does your size enable you to offer a cheaper price than other indexers?

Jacobs: That is one of our things—we offer a better value. We offer objective rules-based indexes. We don’t have a committee. It is all rules based, so everyone can see what is in our indexes and how they are constructed. Secondly, we are very low cost and very lean. We don’t have a high cost structure, so we try to offer a better value.

Other people don’t know markets and they cannot open up markets. We think that our value proposition as an indexer is something that cannot be matched by any other indexer.

 

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