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. Last Updated: 07/27/2016

Dow Jones Licenses Derivatives

CHICAGO -- Dow Jones & Co. has licensed Bankers Trust Co. and Merrill Lynch & Co. Inc. to offer derivative securities based on its stock indices, including the Dow Jones industrial average, Dow Jones said.


"There seems to be a substantial amount of interest in it here and from overseas," said Richard Tofel, director of corporate communications at Dow Jones.


Tofel said the licensing agreements were reached Aug. 22 and took effect Aug. 25. Financial terms were not disclosed.


Derivatives are financial products based on underlying cash instruments. The structured derivative products that Bankers Trust and Merrill Lynch may offer include swaps, over-the-counter options, debt obligations and warrants.


Joe Argilagos, co-head of global equity-linked products at Merrill Lynch, said the Dow derivatives could be useful hedging tools for investors seeking to offset risk in a particular investment.


"These products allow people to maintain an involvement and investment in equities, but also take a little money off the table and partially hedge their exposure," he said.


No U.S. regulatory approval is required for the licensing agreements, Argilagos said.


The licensing agreements come on the heels of Dow Jones's decision to license the Dow Jones industrial average to three U.S. futures and options exchanges.


In June, Dow Jones licensed the American Stock Exchange to offer an exchange-traded unit investment trust. It also licensed the Chicago Board Options Exchange to offer options and the Chicago Board of Trade to trade futures and options on futures, all based on the Dow Industrials.


Last September, Dow Jones licensed the Chicago Mercantile Exchange to trade futures and options on the Dow Jones Taiwan stock index.