Where is financial innovation coming from in these days of (slightly) chastened banks? Look no further than index providers. The profit to be made from joining the index game has tempted Thomson Reuters to throw its hat into the ring, as we reported in FTfm yesterday.
Now S&P has announced an intriguing new securities lending index series, designed to measure the average cost of borrowing US equities. What does it portend when an activity like securities lending gets its own index? S&P says it is bringing transparency to opaque over-the-counter transactions, and providing both lenders and borrowers with a means of hedging (against rate increases that would decrease revenue streams or against costs, respectively). The indices can also be used to speculate on the direction of markets, S&P points out.
The ingenuity of index providers knows no bounds. What next? An index of bank bonuses or CEO pay perhaps? Tracking those might be worthwhile!
