b'Construction WorkersQIS and Proprietary IndicesIndices are more and more important inthe NYSE become the index administrator. todays markets. Reduced to its most ele- There are smart allocation indicesmental, an index is a set of rules. And weresmarter than us, these are designed both lawyers, so, naturally, we like rules, right?to provide diversity and also to respond Were also lawyers with a knack for math.to increasingly volatile markets. Many With our clients, we work on indices thatrecentindicesuseAI,typicallyinthe establish rules that create theoretical port- selection or screening of constituents. For folios. Some of these are investable. Forexample, an index with a volatility adjust-example, some indices can be the referencement feature, typically selects its constit-asset for an ETF, a swap, a security-baseduents based upon an AI review of company swap, or a structured note. Also, some indi- public filings. Another uses machine learn-ces can be licensed to an annuity providering to screen for sentiment based on third-and be the basis for a fixed index annuity.party signal providers when selecting index Constructing an index requires careful vet- constituents. ting to ensure that the index complies, asWe work on decrement indices, volatil-applicable, with best practices and inter- ity targeting indices, the use of exponen-national benchmark principles, as well astially weighted moving average (EWMA) with European benchmark regulation andvarianceandallocationindicesthat U.S. securities exchange listing rules. It alsodivide exposure across both asset classes requires vetting to ensure that the indexand regions. We also see commodity-based rules do not include discretion such that theindices, indices based on futures, and equi-index sponsor or calculation agent would beties and bond-based strategies, including deemed to be rendering investment advice.EWMA volatility and variance measures. Finally, in the United States, for tax rea- What does this diverse array have in com-sons, discretion in an index is to be avoidedmon? A good index and index-based prod-so as not to run afoul of the basket optionucts rest on strong compliance and legal and guidance. Youd think that this doesnt leaveregulatory underpinnings. In short, good much room for creativity? Yet clients proveconstruction.the contrary every day. Index development is an area of signif-icant innovation. Indices can be thematic. We work with clients on ESG-related indi-ces, all quite variedfrom water to womens empowerment to human capital. Indices can be sector-specific. We recently worked with a client on the first index that provides a broad-based investable index on private companies that are unicorns. Eventually, we helped with their arrangements to have14'