Nasdaq OMX Group said Friday it plans to launch 22,000 indexes this fall and 150,000 by the end of next year, using high-speed technology as its weapon against Standard & Poor’s and other index developers.
“Our goal is, if it can be traded, we can index it,’’ said Nasdaq OMX vice president John Jacobs, head of Nasdaq OMX Global Indexes.
The biggest weapon: tick-by-tick updating of the values of indexes.
On Monday, Nasdaq is changing over all the data that feeds its indexes onto its high-speed INET technology. That’s when it launched a new generation of its Global Index Data Service, which has been operating in a test mode for the past three months on the new platform.
Roughly three thousand existing indexes will move onto the platform Monday. Then, in October, Nasdaq plans to add 22,000 indexes, covering stocks, commodities and financial instruments from nations and regions around the world.
By the end of 2013, the exchange operator, whose technology is used in 75 markets worldwide, intends to have 150,000 or more indexes to feed to exchange-traded fund creators, trading firms, portfolio managers, research analysts and other users. Roughly 89,000 of these will be global indexes.
Nasdaq hopes to wedge its way into the worldwide index business against market leaders Standard & Poor’s, MSCI, Russell Investments and STOXX through the use of the capacity and speed of its INET systems.
In effect, Nasdaq wants to re-define real-time.
Currently, Nasdaq and rivals deliver values for their indexes at either the end of the day or in ‘real-time’ feeds. But the ‘real-time’ values are calculated every 15 seconds.
Nasdaq, in this rollout, intends to recalculate the value of each index with every tick in the price of any stock or element contained in the index.
That means the value of an index could change six or seven thousand times a second. That in turn means Nasdaq could be giving trading firms roughly 100,000 more points of data every 15 seconds on a single index, than its rivals.
This will appeal to the “really quantifiably-driven” trading firm or fund manager, Jacobs said.
Not all the indexes will be updated tick by tick, however. At the close of business Friday, Nasdaq could not provide a specific numbers.
But, “this is not the ‘friends of John’ index,’’ Jacobs (first name: John) said.
The indices that will launch on October 22 will span 11,000 securities in 45 countries with 10 years of back data. They will be divvied up into different regions, sectors and expressed six currencies. And then values will be given for total return and price-only returns.
The indices get used for creating funds that track the benchmark’s components and weightings of its components; by portfolio managers, to judge their own performance; by risk managers and analysts, to spot and watch trends; and other users trying to make sense of movements in financial markets.
Nasdaq makes its money licensing use of its indexes to companies creating exchange-traded funds or mutual funds or structured products or other financial instruments needed a base to track; selling data on the prices of the indexes themselves; and selling data on the components and their weights within the indexes.
Nasdaq’s Global Indexes business, formerly known as the Global Index Group, operates out of data centers in Carteret, N.J., Stockholm, Sweden, and elsewhere. The business generated $1 million in revenue in 1999, but has not yet crossed $100 million in annual revenue, Jacobs said.
This could change that. But, even with 150,000 indexes operating tick-by-tick and backed each by 10 years of data, Nasdaq has a ways to go to catch up to Standard & Poor’s and MSCI in overall number of indexes.
They each have somewhere in the neighborhood of 300,000 to 400,000 indexes, he estimated Friday.