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IPE special report May 2018

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S&P boosts benchmarking with Smith Barney buy

GLOBAL – Standard and Poor’s has bought the Smith Barney global benchmark index business from Citigroup – a move it said hailed a shakedown in the industry.

“This is the first big example of consolidation in the industry,” said Eudald Canadell, managing director of Standard and Poor’s (Europe). But the head of rival FTSE Group branded the acquisition an expensive mistake.

S&P said it has agreed with Citigroup “to transition over” the business, formerly known as the SSB Global Equity Index System. The financial terms of the deal were not disclosed. The indices would now to be known as the S&P/Citigroup Global Equity Indices.

Canadell said in an interview that the purchase would enable S&P to cover a wider spectrum of data, benchmarking and customisation. And he added that the expertise of the Smith Barney team in custom-made solutions was attractive. The unit has 300 clients and around 25 staff, with four in London.

He stressed that S&P’s traditional investable index business in Europe still has a long way to go. But he said S&P wouldn’t have made the acquisition if it didn’t think it could expand the unit’s revenue.

“It’s going to be another expensive mistake for them,” said FTSE chief executive Mark Makepeace. He pointed to the fact that the series will retain the Citigroup name as evidence that S&P didn’t make the best deal. The transaction had been in the pipeline for a long time.

S&P said the acquisition takes it to “full-service” status. "Through the addition of this world-class benchmarking business, Standard & Poor's becomes a full-service index provider, offering the marketplace a wider range of index products and services," said S&P’s executive managing director Paul Aaronson.

The FTSE chief said the US market is the key to the index market. “America’s the new battlefield.” The Nasdaq Stock Market has just announced that it would reclassify its nearly 3,400 listed companies according to the FTSE Global Classification System in all NASDAQ indices and associated data products.


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