World’s leading financial index provider adds new product for commodities and futures

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Written by Ray Clancy

Tuesday, 23 February 2010 10:10

Standard & Poor’s, the world’s leading index provider, has launched a new index designed to track prices of commodity and financial Standard futures contracts.

S&P Dynamic Futures Index (S&P DFI) is designed to reflect the price momentum that physical commodities, interest rates and currencies tend to exhibit over the long term due to their cyclicality.

The index offers rules based exposure, both long and short, across a diversified portfolio of 24 highly liquid, global commodity and financial futures contracts grouped into 14 sectors.

‘With the ability to go long or short sectors, the S&P DFI is designed to capture the economic benefit over long time periods derived from both rising and declining trends within a cross-section of the futures markets. The index is also designed to be tradable and readily accessible to market participants,’ explained Michael McGlone, Senior Director of Commodity Indices for S&P Indices.

The S&P DFI is comprised of 24 components, or futures contracts, grouped into 14 sectors of which there are eight financials and six commodity, equally divided by weight. The financials include eight global financials futures contracts, while the commodities include 16 traditional, physical commodity components grouped into six sectors. Long or short positions are determined by measuring the current sector price relative to an exponential moving average.

Index constituent target weights are to be updated annually in order to ensure that their weights in the S&P DFI reflect current economic and production realities. For physical commodities, the target weights are updated to reflect the world production weights of the same commodities in the S&P GSCI Light Energy Index, the widely used, accepted standard in commodity indexing.

In a similar fashion, the target weights in the financial futures contracts are updated each year based on the relative size of the GDP, an indicator of economic significance, of the country represented by the contract.

Overall Standard & Poor’s Index Services has a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1 trillion is directly indexed to Standard & Poor’s family of indices, which includes the S&P 500, the world’s most followed stock market index, the S&P Global 1200, a composite index comprised of seven regional and country headline indices, the S&P Global BMI, an index with approximately 11,000 constituents, and the S&P GSCI, the industry's most closely watched commodities index.