Concurrent with launching a new indexing platform, the Nasdaq Stock Market also introduced a new index, the Nasdaq Healthcare Index, in response to demand.
"People asked for it," said John Jacobs, the executive vice president of Nasdaq Financial Products. "We've had great success with the Nasdaq Biotechnology Index, which has a number of financial instruments and great visibility in the marketplace. But that's biotech and pharma. A lot of health care companies have asked for a broader index, a broader benchmark, and since we now have the capability to do that, we did it."
Market value-weighted, the Nasdaq Healthcare Index contains Nasdaq-listed companies classified as part of the biotechnology, health or pharmaceutical sectors. That designation stems from FTSE - a global company classification database. The group includes biotech and pharmaceutical companies, as well as health maintenance organizations, hospital management and long-term care, medical equipment and supplies and other health care firms.
"There's always a level of interest in biotechnology, pharma and health care," Jacobs told BioWorld Today, adding that the new index allows investors to diversify across all three sectors, "because they certainly don't all move in the same direction at the same time."
Traded under the symbol "IXHC," it debuted less than a month ago with a base of 200. Its value since has climbed to 216.05 as of Tuesday's market close, at which time it included 539 companies. Going forward, that number could change daily as no firms are screened out - it contains the biggest to the smallest.
"There's baseline interest," Jacobs said, "but we've seen anecdotally increased interest in requests for this index, and requests for other ways to look at the biotech index."
Nasdaq's Biotechnology Index is more of a pure play fund of biotech and pharma companies that also meet other eligibility criteria. Traded as "NBI," it was valued at 791.50 at Tuesday's market close. It was launched 12 years ago with a base of 200.
"There's a very cyclical component, too," Jacobs said. "Sometimes you just have that baseline interest, and other times you have people flock to the door. I think biotech has gone through one of its cycles recently, and is getting some additional renewed interest."
Its securities are evaluated semi-annually, and those currently within the index must meet maintenance criteria of $100 million in market capitalization and 50,000 shares average daily trading volume. Those not meeting such criteria are retained provided that such security met the criteria in the previous semi-annual ranking, while securities not meeting the criteria for two consecutive rankings are removed. Changes occur every May and November, using March and September closing price and volume data, as well as April and October publicly available total share outstanding data.
Criteria for a public listing on the Nasdaq exchange in general are different. Nasdaq's Biotechnology Index is calculated under a modified capitalization-weighted methodology. At present, shares in Amgen Inc., of Thousand Oaks, Calif., constitute nearly one-fifth of the index, which includes 158 companies. For those on that index and the newer one, such listings provide direct and indirect visibility and investment opportunities through exchange-traded funds or other such mutual funds designed to track an index.
"If an index starts becoming popular and people follow it, then they start looking to see who's in that index, so that leads to the visibility aspect," Jacobs said. "Second, if it gets to the point of the Biotechnology Index, which has actual financial products, it can lead to direct and indirect investments."
As for Nasdaq's new index platform, he said it expands indexing capabilities by enabling it to calculate and disseminate an unlimited number of indexes on a real-time basis. In addition to indexes that count total return (which counts dividends) and price return (the price of the stocks), Nasdaq now can calculate and disseminate indexes that include securities listed on its market, as well as on the New York Stock Exchange and the American Stock Exchange. Nasdaq has 400 index products in 34 countries.
"We're constantly building and evolving our technology for trading stocks," Jacobs said, "and we had a great opportunity to tack on a state-of-the-art index engine, as well."