Nasdaq OMX Index Launch Will Benchmark Government Bailouts

Nasdaq OMX Group Inc. (NDAQ) unveiled plans Thursday to launch a suite of trading and investment products tied to companies receiving state aid during the global financial crisis.

The transatlantic exchange operator's first launch is the Government Relief Index, or GRI, tracking 24 companies that have received more than $1 billion apiece in backing from the U.S. Troubled Asset Relief Program or other support mechanisms.

John Jacobs, Nasdaq OMX's executive vice president, said the exchange plans to launch indices tracking smaller recipients of U.S. state aid as well as versions reflecting support to European companies.

Jacobs, in an interview with Dow Jones Newswires, said Nasdaq OMX is also looking at licensing options and exchange-traded funds based on the initial GRI index to undisclosed third parties.

He said the first index will act as a long-term benchmark to measure the effectiveness of the TARP and other programs.

"If these companies outperform the overall market over next five years, we can say that this was the right thing to do," he said.

Components include receipients of federal aid such as General Motors Corp. (GM), American International Group Inc. (AIG) and Citigroup Inc. (C), as well as other financials such as JP Morgan Chase & Co. (JPM) that the U.S. federal government enlisted in the TARP.

Jacobs said that GRI components would remain in the index even after they repay any government aid or investment.

"The whole goal is to measure how the companies that got that bailout money perform," he said. "Ten years from now we'll be able to look back and see how the bailout program of 2008 worked."

Ed Ditmire, exchange analyst at Fox-Pitt Kelton Cochran Caronia Waller, said the GRI was "timely and very interesting," though he noted that only a few of the thousands of index-based products deliver big profits.

"When they're successful, like the Nasdaq Composite Index, indexes are very lucrative businesses," said Ditmire. "But the vast majority of indexes don't find a groundswell of interest or support."

-By Jacob Bunge, Dow Jones Newswires; [phone]; [e-mail]

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