Index licensing fees: heading for a fall?
Index licensing fees have long been a bone of contention among providers of exchange-traded funds and structured products that use industry benchmarks. But can a new breed of low-cost index really challenge the prevailing licensing model? Jonathan López reports
Index providers tend to charge companies wishing to use their indexes licensing fees based on assets under management (AUM), which means the bigger the exchange-traded fund (ETF), the greater is the revenue from fees that goes to the index provider. And with the total volume of ETFs in existence now in excess of $2 trillion, some market participants believe index firms have never had it so good and are questioning the rationale behind the fee structures.
"The AUM-based model makes no economic
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