Nasdaq Boost Index Business With Dorsey Wright Acquisition

Nasdaq (NasdaqGS: NDAQ), the exchange operator and provider of indexes for use by exchange traded funds, said Monday it will acquire Dorsey, Wright & Associates (DWA), an independent registered investment advisor that also provides indexes for an array of well-known ETFs.

By combining the 17 ETFs currently using DWA indexes with the 69 benchmarking to Nasdaq indexes, “Nasdaq Global Indexes will become one of the largest providers of smart beta indexes with nearly $45 billion in assets benchmarked to its family of Smart Beta indexes and more than $105 billion benchmarked to all Nasdaq Indexes,” according to a statement issued by New York-based Nasdaq.

Nasdaq will pay $225 million for Virginia-based Dorsey Wright. The deal jibes with previous speculation that Nasdaq has been looking to increase its indexing business in an effort to grab a larger slice of the booming ETF industry. Nasdaq intends to challenge rivals like S&P Dow Jones Indices, MSCI and FTSE Group that have capitalized on the quick growth in ETFs. The greater competition could help drive down fees for indexing, which could trickle down to lower investor expenses.

In 2014, the U.S. exchange traded products industry topped $2 trillion in assets under management. As of Dec. 22, 2014, U.S. ETP assets jumped 18% $1.698 trillion to $2.007 trillion based on positive market performance and net new assets,” according London-based ETF research firm ETFGI. [U.S. ETFs Hit $2 Trillion Milestone]

Dorsey Wright is already a significant player in providing indexes for strategic or smart beta, one of the fastest growing corners of the ETF universe.