Wall-Street: How did you find the proposal to team up from Sibiu Stock exchange that operates in an East-European emerging market?
John Prestbo: Emerging markets are in still in favor with investors. Especially countries like Romania, which is certainly one of the more attractive European markets, considering its growth rates and rapid development is attracting foreign investment.
Bucharest is one of the largest financial and industrial centers in the region with SIBEX being the leading futures exchange in Eastern Europe. Our cooperation has been an interesting and promising experience for us.
Wall-Street: The Dow Jones Industrial Average futures performed very well on SIBEX market since it was launched in January this year. Were you surprised to see that the Dow Jones Industrial Average could be successfully traded by the Romanian investor community?
John Prestbo: We are pleased, but not surprised. The Dow Jones Industrial Average is the most widely known stock market index globally. Whenever investors around the world follow the U.S. stock market they usually look at the performance of The Dow. However, the success of a financial product – even one based on a popular index -- very much depends on the skills of the product issuer. It seems that SIBEX has worked very hard to make the futures contract successful.
Wall-Street: What will spark Romanian investors’ interest for Dow Jones futures?
John Prestbo: The Dow Jones Industrial Average measures the performance of the U.S. stock market. It has only 30 stocks but it very effectively represents the daily movements of the world’s biggest stock market. The index includes household names of U.S. companies that are familiar to market participants. Accurate market tracking, brand-name index components and 114 years of data history – all these attributes are attractive to market participants everywhere.
Wall-Street: Do you think that the customization of the product by denominating it in the local currency and the presence of the market-maker helped it to become more attractive?
John Prestbo: With respect to creating successful investment products we need to defer to SIBEX since the exchange is the expert in creating futures for the Romanian market. But from our viewpoint as global index provider, I can confirm that many of our clients “customize” indexes to better fit the local needs -- and very often that includes calculating our “foreign” indexes in local currencies as well as U.S. dollars.
Wall-Street: SIBEX development plans include the potential implementation of options on DJIA. Do you agree to extend your partnership with Sibex in order to introduce more products based on Dow Jones Indexes?
John Prestbo: We are very pleased that our relationship with SIBEX is raising our profile in Eastern Europe. We will certainly look for opportunities to work more closely with the exchange on other projects. Details about how this cooperation can and will look like will be discussed with SIBEX executives.
Wall-Street: What makes the Industrial Average be so popular among the investors worldwide?
John Prestbo: The Dow Jones Industrial Average was the first index to measure the performance of the U.S. equity market on a daily basis. Having daily closing values stretching back to 1896 is very attractive for market participants, researchers and media. Furthermore, the index is comprised of 30 blue-chip stocks across all important U.S. sectors and therefore, by extension, reflects the entire U.S. economy. The index provides a straightforward, comprehensible view of the U.S. stock market – which as you know has a great deal of influence on the global economy.
Wall-Street: How are your Central and Eastern Europe operations going? Are there other stock exchanges in the region interested in these types of products?
John Prestbo: We have experienced interest in our products, the Dow Jones Industrial Average as well as other indexes. The interest is in licensing but also calculating customized indexes for our clients. But it is especially exciting for us to work with an exchange like SIBEX that seems to be at the forefront of innovation in this region.
Wall-Street: How do you support the entities that launched DJIA based products?
John Prestbo: Dow Jones Indexes takes its role in index calculation and maintenance very seriously. Our index support teams in the US, Europe and Asia monitor our indexes and underlying components intensively around the clock. We provide our clients access to our data, and the support teams handle their requests and demands. We also cooperate with our clients by advising on marketing and public relations opportunities.
John Prestbo is editor and executive director of Dow Jones Indexes. He has responsibility for the exploration of new index ideas, as well as marketing, public relations and analytical research. He also is chairman of the Dow Jones Index Oversight Committee.
In 1964, John Prestbo joined The Wall Street Journal as a food, agriculture and commodities reporter in the Chicago bureau. He has co-authored or edited several books over the past 30 years.
Prestbo has a column on the business and finance Web site MarketWatch. He has been a regular and guest contributor on various cable television business channels, including CNBC as well as Fox Business News.
Earlier this year, Sibex signed with Dow Jones Indexex a sublicensing agreement for the Dow Jones Industrial Average index for the introduction of futures contracts on this base asset.
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