Index provider - FTSE Group

In early 2008, FTSE was approached by the Singapore Stock Exchange and Singapore Press Holdings (SPH) to revamp Singapore's headline blue-chip index and create a new series of tradeable indexes that would improve access to the Singapore stock market and stimulate greater structured product issuance. The relaunch of the Straits Times Index (STI) and the new FTSE ST Index series in January was an enormous success. It also demonstrates FTSE's ability to not only create tradeable indexes that capture the attention of product issuers but also its ability to maintain fruitful partnerships with local stock exchanges.

"Before we relaunched the index, we conducted a comprehensive market consultation with a plethora of structured product issuers and other market participants," says Fran Thompson, director, Asia-Pacific, at FTSE in Hong Kong. "Many said there were far too many stocks in the index that weren't trading on a regular basis and that the index was far from being a representative, tradeable product. But since the relaunch there has been a proliferation of structured products using the index as an underlying."

Since the relaunch in January 2008, which also included sectoral indexes, there have been multiple issues of over-the-counter licences on the FTSE-calculated STI and the FTSE ST Series. Single issues, baskets and annual licence deals have been completed with key clients such as UBS, BNP Paribas and Societe Generale. In addition to State Street's longstanding ETF based on the STI listed in Singapore, Northern Trust licensed the STI to launch an ETF in the US.

FTSE's policy in partnering with local stock exchanges has proved successful for the index provider, which has forged links with the Singapore Stock Exchange, Bursa Malaysia, the Stock Exchange of Thailand, the Taiwan Stock Exchange and the Asean group of exchanges. "When we take over the calculation of a domestic benchmark and series, and create tradeable indexes as part of that suite, we establish a partnership in a new market, which gives us legitimacy and credibility locally," says FTSE's Thompson. "The local stock exchange then has a benchmark and this leads to an increase in products based on the indexes."

FTSE has also been prolific in the launch of other new indexes and has gained a market reputation for being both assertive and in tune with the needs of product issuers. The provider typically works with at least six or seven product issuers on each index series that it prepares for launch. "FTSE has been very open and extremely aggressive this year," says one structured-product issuer. "It has been in the market a long time, has its feet on the ground and tends to get far more involved than the other index providers."

Among its numerous launches is the FTSE ST China Top Index, which was launched in July 2008 as a result of demand generated during the launch phase of the series earlier in the year. Clients saw a growing trend of Chinese value stocks being listed in Singapore and wanted to capture this growth. The index takes the top 20 S-shares that have either 30% or more Chinese ownership or have 50% or more revenue derived from China.

FTSE became the first provider to launch Vietnam indexes, with the tradeable benchmark FTSE Vietnam Index Series the sole underlying for all structured products and ETF issuance based on the country. A custom index was also built for Citi's structured products issuance using Vietnam as an underlying, while Deutsche Bank listed an ETF in London using the same underlying.

Prior to the China market downturn, the FTSE Xinhua (FXI) China 25 and A50 indexes continued to attract requests for licensing. The indexes offer investors exposure to Chinese companies listed on Chinese exchanges in Hong Kong, Shanghai and Shenzhen, and have proved popular as the basis of equity-linked notes and OTC products that target key clients in Hong Kong.

"Barclays Global Investors (BGI) has products listed on FTSE's indexes globally, but specifically in Asia, its growth and commitment is very strong," says Jane Leung, head of iShares Product at BGI in Hong Kong. "Our flagship product, the iShares FTSE/Xinhua A50 China Tracker, has been a wonderful collaboration that provides investors with exposure to the difficult-to-access local Chinese A-share market. FTSE's dedication to research and providing investable and transparent indexes makes its indexes among the most highly sought after."

Besides the launch of FTSE Shariah Global Equity Index Series this year, several other sharia-related projects were undertaken including the custom-built FTSE Shariah Japan 100 Index for Daiwa Asset Management in Japan.