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Abstract
Index providers tend to charge companies wishing to use their indexes licensing fees based on assets under management (AUM), which means the bigger the exchange-traded fund (ETF), the greater the revenue from fees that is going to the index provider. And with the total volume of ETFs in existence now in excess of $2 trillion, some market participants say index firms have never had it so good and are questioning the rationale behind the fee structures. Index fees can also vary according to the number of issuances linked to an index. One London-based banker at a European bank cites a European index provider's annual fees as being $104,000 for up to 25 issues, $121,000 for up to 40 issues and $140,000 for unlimited issues. Further evidence of the revenue generated by licensing fees can be seen in filings by MSCI to the US Securities and Exchange Commission.