Russell Indexes becomes the latest provider to speak out on making indexing data free for the public good.
[This article previously appeared on our sister site, IndexUniverse.eu.]
Indexing market participants are speaking out against making indexing data free for the public good, after one institution launched a free data provision service on its smart beta indices.
The debate comes as competition in the indexing market is heating up.
Last month Edhec-Risk Institute announced that it would offer investors free access to data on a wide range of so-called "smart beta" indices. The move is likely to put pressure on commercial index providers’ business models, and the—normally quiet—index providers have started speaking out.
Rolf Agather, managing director of global index research and innovation at Russell Indexes told IU.eu: "Competition is always a good thing, and transparency is key, but we don’t believe that requires us to provide our service as a free public good."
"Data provision is part of our business model. Indexing firms provide a service and part of this service means we have support desks around the world, we have a good reputation and offer a quality service, which includes maintaining the index. Ultimately we are a full service provider, not a 'do it yourself' model. That business model will have a lower support system,” said Agather.
Edhec-Risk, the financial research institute of France-based Edhec business school, publishes a wide range of data covering popular smart beta equity indices on a new website, scientificbeta.com.
It is part of a broader drive by Edhec-Risk to increase transparency in the indexing sector. Earlier this week the institute said that regulators should insist on the full transparency of financial benchmarks to allow index users to assess potential risks.
Agather said: “In many ways, what they have done can be complimented. They have brought a level of transparency to their products, and we applaud that being advocates of transparency ourselves. However, we don't agree that transparency requires providers to give away everything."
However, some argue that they are already transparent enough.
Baer Pettit, head of the index unit at MSCI previously told IU.eu that: “Across the whole range of equity indices from a swathe of providers, I’m not conscious of any party in the investment process that is suffering from a purported lack of transparency.”
“And we live in a competitive world, where different providers have different business models. Compare open-source software with software for which you pay a subscription fee. That gives users more choice, which in my opinion is a good thing,” Pettit says.
Agather also agrees that the indexing industry is no different to any other evolving market. “New entrants are coming in and they need to differentiate themselves somehow. In this case, Edhec has a niche by offering something at low cost," he said.
While increasing competition will put pressure on index providers, they are keen to highlight the cost of running an index.