Summary
Despite near record low volatility in equities, demand for derivatives on equity indexes continues to grow as more capital is benchmarked to indexes. At the highest level, indexes are intended to lower costs and broaden exposure to a variety of underlying investing instruments, and historically speaking they have succeeded wildly and there has been a commensurate proliferation of indexes. The difference between a futures contract on a commodity and a stock index is minimal and largely conceptual. The move towards indexation has hit the commodity space. With the end of the long equity bull market in 2000 and subsequent rise of a commodity bull market, institutional investors are applying the lesson they learned in the 1990s and investing in passive commodity indexes. Indexes are a key element in the democratization of investing, adding that indexes and futures on the indexes have proven themselves. Without them, it would all be less successful and more expensive than it is today.
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Indexes Equal Instant Exposure
Despite near record low volatility in equities, demand for derivatives on equity indexes continues to grow as more capital is benchmarked to indexes.
"We saw volume in stock trading and stock index trading decline in a bear market, which was no surprise, everyone was ticked-off at the stock market," says David Blitzer, managing director and chairman of the indexing committee at Standard...See the full content of this document
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