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A Window on Index Liquidity: Volumes Linked to S&P DJI Indices How active are users of passive investment vehicles?

A robust and active trading ecosystem benefits asset owners and investment managers by fostering transparency, market efficiency, and investor confidence. This paper documents, for the first time, the extent and nature of that ecosystem for indices produced by S&P Dow Jones Indices (S&P DJI). The results offer a window into trading around certain market benchmarks, providing a new perspective on the use of indices as the basis for active and passive investment strategies.

• We measure aggregate U.S. dollar total volumes for a range of benchmarks including the S&P 500® and the Dow Jones Industrial Average®.

• We suggest the potential network effects in liquidity that can develop between products tracking related indices.

• We demonstrate that average holding periods can vary widely across index vehicles (see Exhibit 1), illustrating the high level of active usage of some passive investment products.

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