Standard & Poor’s has launched the S&P World Commodity Index, the first index to consist solely of listed commodity futures contracts that trade outside of the US.
“The launch of the S&P WCI is the result of Standard & Poor’s meeting the market’s needs for an international commodity index that would complement the US focused S&P GSCI, providing all-world commodity exposure,” says Michael McGlone, director of commodity indexing at S&P Indices.
“The S&P WCI is a natural extension of the S&P GSCI, and reflects S&P Indices’ commitment to extending its reach beyond US equity indices and into alternative areas of the global market.”
The index is a rules-based, world-production-weighted commodity index. It includes 22 commodities covering the agriculture, energy and metals sectors, listed on eight international exchanges and traded in six currencies in Asia, Europe, and North America. While the S&P GSCI is comprised of only US dollar based commodities, the S&P World Commodity Index is multi-currency.
To preserve the tradability of the index, it limits eligible commodity contracts to those that are the subject of active, liquid futures markets. To replicate actual commodity market performance, the index includes a “rolling” procedure designed to replicate the rolling of actual positions in the designated contracts.
The S&P World Commodity Index is calculated in US dollars. While the underlying futures contracts prices are traded in local currencies, using WM/Reuters’ spot exchange rates, these local currencies are converted to US dollars. There is no limit on the number of contracts that may be included in the index, as long as they satisfy the eligibility criteria.
