Scientific Beta

Index Universe: EDHEC also made headlines this year when it announced it would offer investors access to free data on a wide range of so-called smart beta indices. This made several commercial index providers argue that data provision is part of the commercial business model and necessarily paid for.

Index Universe 05/11/2013

"(...) In a note from EDHEC it said it “takes exception to the language and interpretation and wishes to underline the considerable investor protection and competition advances introduced by ESMA, notably with respect to the mitigation of counterparty risk and the quality and transparency of financial indices.” (...) ESMA’s guidelines, which were defined for UCITS earlier this year, say that UCITS investing in so-called financial indices will have to ensure that investors are provided with the full index calculation methodology, as well as ensuring that the index respects strict criteria on rebalancing frequency and diversification. This means the disclosure of index constituents, of the calculation and rebalancing methodology, and of index methodology changes. Index providers will also need to publish index allocations and must put index levels into the public domain. It also says that authorities globally should adopt standards of transparency in line with the ESMA guidelines if the industry wants to achieve sustainable growth. EDHEC has been highly vocal on its position within index transparency. It previously criticised IOSCO’s guidelines for exchange traded funds, saying that it had side-stepped the issue of index transparency. A great proponent of index transparency EDHEC made several calls earlier this year for users to insist on full transparency. EDHEC also made headlines this year when it announced it would offer investors access to free data on a wide range of so-called smart beta indices. This made several commercial index providers argue that data provision is part of the commercial business model and necessarily paid for. (...)"