New Commodity Indexes: They're Just Teasing Us

By Brad Zigler

Okay, I admit it. I'm lazy. I'd much rather be spoon-fed than have to grub up stuff for myself.

But on this score, I'm not unlike a lot of investors. Busy with life, most of us don't have a lot of time to devote to detective work searching for a commodity index shop manual.

A couple of months ago, two investment banks made a fair amount of noise about newly devised commodity indexes that could dampen the effect of contango. Contango, you'll recall, is the pricing characteristic of the commodity term structure in which nearby deliveries trade at lower levels than deferred contracts (see "The Battle Against Contango").

Early in November, BNP Paribas touted its Commodity Market Representative Index [CMRI] while JPMorgan flogged its Commodity Curve Index (CCI) to the press. Since then, a pall of darkness has fallen. Anyone looking for details on the new benchmarks on the companies' Web sites would be stymied. There ain't nuthin' there.

Want a research paper explaining the index methodology or construction? Too bad. Not to be found. At least not without asking.

To be fair, JPMorgan is attempting to atone. I now have JPMorgan's white paper. But two months to get a white paper? A paper dated - and presumably available - on the day the company went public with news of its new index? Why couldn't that have been put up on the company's Web site?

Paribas and Morgan aren't the only sinners. Goldman Sachs Group went a step further on the obfuscation path when it launched exchange-traded notes on an enhanced version of the venerable S&P/GSCI. The notes, traded under the ticker symbol (GSC) on the New York Stock Exchange's Arca platform, float out in the trading ether unattached to a site explaining the underlying index methodology, benefits or purpose.

No wonder volume's so light.

For the benefit of index manufacturers who might not have heard this message before, let me reiterate: Transparency is GOOD. It's a competitive advantage. When you make it easy for investors and their advisors to see your wares, you're much more likely to make a sale.

Hiding this stuff under a bushel does no one any good.

More on this later ...