May 6th is the day that futures contracts based on the Dow Jones Industrial Average (DJIA) will begin trading on the Stock Exchange of Hong Kong. The contracts will be priced in Hong Kong dollars based on the formula of the underlying multiplied by HK$10. The market maker for the contracts will be Timberhill.
James Barringer, Asia Pacific regional director for Dow Jones Indexes, confirms that all the necessary approvals have been granted. The firm is awaiting approvals for options contracts based on the DJIA to be granted in Hong Kong, but Barringer believes they will be forthcoming soon. He also claims that the firm will "imminently" be launching exchange traded funds also based on the DJIA and also traded in Hong Kong. Final approvals for these are also expected in the near future.
Barringer also notes that the firm aims to have DJIA futures trading on the Osaka Securities Exchange by July.
Dow Jones Indexes - one of the largest index providers in the world - makes nearly all of its revenues from licensing its indices. Licensees include stock exchanges which base derivative contracts on the indices and fund management groups and investment houses which uses the indices as the basis for structured products such as guaranteed funds.
In this way the business model of Dow Jones differs from that of other index providers, such as MSCI or FTSE, which make most of their revenues from selling information about the component parts of their indices.
"Anyone can make an index but you really need the derivatives off them to make them relevant," says Barringer. Barringer is also hoping to attract attention from Asian clients for his company's European suite of STOXX indices, as well as the series of blue chip Global Titan indices. He recently opened a new office in Tokyo to spearhead Dow Jones' push into the Asian market.
