S&P Takes On Smith Barney's Indexes

Standard & Poor's (S&P) is taking over the calculation and maintenance of Citigroup's Smith Barney global benchmark index business, formerly known as SSB Global Equity Index System, it was announced last week. The deal will allow S&P to expand its custom index service.

The addition of Smith Barney's database gives S&P access to a larger pool of resources, says Paul Aaronson, executive managing director at the vendor. "The real attraction to us is the access to Smith Barney's database of over 30,000 securities, which will give S&P the ability to create any type of equity index users ask for," Aaronson says. "One of the trends today is that users are looking for increasingly specific ways of measuring performance, which standard benchmarks do not provide for."

The new indices, which will be renamed the S&P/Citigroup Global Equity Indexes, will be classified according to the Global Industrial Classification Standard (GICS) but will still be available under Smith Barney's six-level sector classification scheme, says Robert Barriera, vice president, S&P Index Services. Smith Barney will continue to own the indices for some time, says a S&P spokesperson, who declines to comment as to when ownership might terminate.

S&P expects the transaction will be completed in approximately 18 months, says the spokesperson. The indices will be moved over to Standard & Poor's Index Calculation Engine (SPICE), S&P's operational system for calculating its investable indices worldwide.

But one of the challenges to transitioning the indices is that Smith Barney and S&P operate on different platforms, Barriera says. Smith Barney uses Fame Information Services technology, while S&P's SPICE has an Oracle back-end with a Java front end. The Fame platform uses time series capabilities that are not used in Oracle, rendering the two platforms incompatible. In order to facilitate the switch, S&P will temporarily set up a Fame-based environment, says Barriera.

S&P has also hired an undisclosed number of index staffers from Smith Barney who will join S&P's Index Services division in New York and London. The new staff, which include seven technologists, is expected to move to S&P next year, Barriera says. The addition of the Smith Barney staffers will have no effect on management or employees in S&P's Index Services division, according to the S&P spokesperson.

Smith Barney says it cannot comment on ownership issues and explains that the total number of employees to be moved to S&P has not been determined yet.