Products June 2, 2001

FTSE Launches Eleven "Tradeable" Indices

February 6, 2001 (PLANSPONSOR.com) - The investable world is getting larger, at least as far as international equity indexes are concerned.
Reported by

FTSE Americas is launching what it calls “the world’s first blue-chip global sector indices” which are designed to stimulate investing by calculating the new FTSE Global Sector indices in real time.
 
The FTSE Global Sector Index Series is a family of 11 “highly tradable” indices that were created for use in sector-based trading supporting a wide range of over-the-counter (OTC) and listed products and exchange-traded funds and derivatives. The indices will go live February 12. 
 
To give the indexes some real world applications, a few trading firms said they plan to launch new products based on the indices. However, only Merrill Lynch, has publicly said it will introduce a worldwide range of OTC and listed products including warrants, certificates, notes and funds on the indices. The products are initially aimed at institutional investors.
 
Global Minds

FTSE said the indexes were created to support a growing list of sector-based trading in a wide range of OTC and listed products, plus exchange-traded funds and derivatives. The new indices are:

  • Global Autos
  • Global Banks
  • Global Energy
  • Global Basic Industries
  • Global Financials
  • Global General Industries
  • Global Media
  • Global Pharmaceuticals
  • FTSE Global Tech
  • Global Telecoms
  • Global Utilities.

The new indices indicate a growing move towards more international sector trading versus investing in specific countries. Jane Staunton, president, FTSE Americas, told PLANSPONSOR.com that research shows that 67% of managers are investing in sectors today compared to 20% just three years ago.
 
One reason for this is that the new global indices provide better tracking to the underlying components which can help spawn the creation of new OTC derivatives, enhance cash management, and allow enhanced indexing, Staunton said.
 
She also said the FTSE classification system is “rapidly being adopted as the global standard,” by such large funds as the Russell 3000 index, and 30% of European exchanges.  FTSE is also discussing the adoption of the indexes with several unnamed Asian exchanges, she added.
 
Designed for Trading
 
The most liquid sector in the series, FTSE Global Tech, can allow a US$1 billion global trade to be completed in less than one hour on average, FTSE said. Even the most complex sector, FTSE Global Autos, only takes an average of eight hours to execute the same trade, according to the index creator.
 
These tradable indices are “a logical development” supporting the trend towards sector-based investment and will be used in conjunction with the broader based FTSE All-World sector indices which are used by fund managers worldwide as a wide-ranging portfolio analysis tool, FTSE USA vice president Mike Gormley told PLANSPONSOR.com.
 
The blue-chip FTSE Global Sector indices represent the most popular 11 groups from the 39 sectors of the FTSE Global Classification system. “They are specially designed to support trading products,” he said.
 
Gormley anticipates other brokerage houses will launch similar institutionally-oriented products soon.  Exchange traded funds for retail investors and other derivatives are expected to follow “soon” afterwards, he said.
 
A complete list of the underlying companies in each index is available at the FTSE Web site .

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