Nasdaq Introduces New Index

Nasdaq Stock Market Inc. on Wednesday started a new index -- the Nasdaq Q-50 -- made up of companies poised to enter the Nasdaq-100 Index.

This roughly $21 billion ETF, which many traders still call the "Cubes" for short and was previously named the Nasdaq-100 Trust, is often the mostly heavily traded security on any given day. ETFs are baskets of securities that trade on exchanges like individual stocks.

The Nasdaq Q-50 Index is made up of stocks that are next eligible for inclusion in the Nasdaq-100, ranked by market capitalization, the exchange said.

Meanwhile, the competing PowerShares QQQ Trust simply tracks the 100 largest nonfinancial stocks in the Nasdaq Composite Index. PowerShares Capital Management, owned by Invesco PLC, earlier this year took over the sponsorship of the fund and renamed it PowerShares QQQ Trust. The ETF's investment policy and tracking index were left unchanged.

The launch of the Nasdaq Q-50 Index underscores the efforts of Nasdaq and other exchanges to grab a slice of the growing ETF pie by attracting trading volume and new listings. Nasdaq recently started a market specifically designed for ETFs and other index-linked investments.

In late 2004, the primary listing for the so-called Cubes moved from ETF pioneer American Stock Exchange to the Nasdaq.

Investors can use the Nasdaq Q-50 Index to gain exposure to "a portfolio of some of Nasdaq's fastest-growing companies in a diverse range of industries," said Steven Bloom, Nasdaq senior vice president, in a statement.

John Jacobs, Nasdaq executive vice president, said in a telephone interview that the Nasdaq Q-50 by nature focuses on companies with smaller market capitalizations than those in the Nasdaq-100.

Nasdaq has had conversations with financial institutions to launch ETFs and derivatives based on the Nasdaq Q-50, made up of stocks "knocking on the door to get into the Nasdaq-100," he said.

As of Oct. 9, the Nasdaq Q-50 had a five-year annualized return of 26 percent, versus 21.9 percent for the Nasdaq-100, according to the exchange. However, the Nasdaq Q-50 was slightly less volatile over the same period.

Stocks in the Nasdaq-100 Index are added and deleted once a year, in December.