Exchange operator Nasdaq OMX has teamed up with securities financing information provider Data Explorers to launch a new index, which it claims will boost liquidity and help protect both long and short investors.
The new product, called the Nasdaq-100 Data Explorers Optimized Index, is designed to be an enhanced version of the existing Nasdaq-100 index and comprises 100 global non-financial companies. The index has been set up to retain the return and volatility characteristics of the original Nasdaq-100 index, but with improved liquidity.
The Nasdaq-100 Data Explorers Optimized Index screens out stocks that are lacking in liquidity or expensive to borrow in the stock-lending market, based on analytics from Data Explorers. This entails screening the Nasdaq-100 index on a quarterly basis using stock-lending and short-interest information covering more than 3 million daily transactions, collected from investment banks, prime brokers, lending agents, beneficial owners and hedge funds. The two firms have said they plan to launch additional indexes based on the optimised methodology over the coming months.
“The launch of the Nasdaq-100 Data Explorers Optimized Index offers investors the liquidity of the Nasdaq-100 Index components but with extra measures of liquidity,” said John Jacobs, executive vice president, Nasdaq OMX.
“We believe the application of our screening methodology to the Nasdaq-100 Data Explorers Optimized Index will help investors improve liquidity and manage risk,” added Data Explorers CEO Donal Smith. “We are confident this new index will become a model for the construction of other new indexes and the basis of exchange-traded products.”