JPMorgan is planning to create index products based on specific sectors within the Standard & Poor's American depository receipt index. The firm already offers investors products based on the entire ADR index, said Jerry Hanweck, equity derivatives strategist in New York. JPMorgan is waiting for S&P to begin publishing pricing for sector-specific indices and then will launch over-the-counter derivatives products, including total-return swaps and options. Eventually, JPMorgan will look to launch exchange-traded funds on the index and individual sectors.
Bob Shakotko, managing director for index services at S&P in New York, said the sector indices will be set up shortly and the market will likely see OTC products based on them by the fourth quarter. The sectors are consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services and utilities. Hanweck added that eventually they could offer customers tailor-made products on sub-sectors, such as banks within the larger financials group.
Shakotko said it is talking to several firms about eventually setting up ETFs based on the index. That process, however, takes a while since ETFs require regulatory approval, he said. Shakotko would not elaborate on which firms are in discussions with S&P.
