Thomson Reuters enters index market with 800 indices

Thomson Reuters has unveiled a range of 800 indices covering global markets, benchmarking specific countries and sectors on which investment vehicles such as ETFs can be based.

The launch of the indices is built on the company's 30 years of experience in calculating and distributing indices for other index providers, although Thomson Reuters says this is the first time the company has issued indices under its own brand.

The range covers 44 countries and 18 regions, with an overlay of global, regional and country indices according to economic sector.

Thomson Reuters says that the indices differ from others in the marketplace by utilising a proprietary liquidity filter which selects the equity index constituents by price, rather than volume.

Thomson Reuters chief index strategist Andrew Clark says: "As far as we know, there is no other index provider using price as the liquidity filter. That's surprising because the academic research started on this 20 years ago, which shows the three best indicators are price, then bid-ask spread, followed by quote-depth. If you're going to use one, price is the best indicator; volume falls further down."

He explains that Thomson Reuters deals with almost every single exchange globally, so price data is easy to obtain, especially in terms of the end of day data which it uses for the liquidity filter.

Thomson Reuters global managing director of indices Sunand Menon says: "Customers have asked us to be in the index space. We've been in this business in the background for the past 30 years, which is one of the industry's best kept secrets - you name the index and there's a big chance we're calculating that index."

He adds: "The industry is large enough for us to be a major player and at the same time still serve the other index providers from a calculation perspective."

The indices also employ the Thomson Reuters Business Classification system, which the company claims is the industry's broadest, covering 71,000 public and 230,000 private companies worldwide.

Clark says: "We have a unique structure called the Thomson Reuters Business Classification. It differs from other classification systems, because our granularity is greater top-down, for example, down to the green industries on a global level."

The Thomson Reuters Optimal index range is already licensed to ETF providers and Clark says that the company is in discussion with ETF providers interested in the new range. "People in the Middle East are very interested - we've had conversations with one of the exchanges in the Middle East about building derivatives off of our indices."