Just to be clear on the issues:
SP500 as a benchmark is not in question We use SPY and that etf, along with the others, remain part of the p123 suite of licenses.
The issue is constituent lists. Algorithmically, they may be impossible to recreate because S&P Index Committee judgment is no small thing (What makes the active-passive debate so funny is that the S&P 500 is really an actively managed portfolio). Before we signed on with Compustst (S&P subsidiary), we manually created the constituent lists and mismatches likely occurred because of timing. Every now and then Marco would send me an IM saying something like: “When was the last time we checked the S&P constituent list for changes. Maybe we should do it again now.” And I’d respond with something like: “Oh #$&! That again, yeah i suppose we should do it now.” I’d do it manually by surfing the S&P web site hunting for announcements of changes and hoped to avoid making too many mistakes.
I can’t officially speak for Marco until he signs on the dotted line, but at the moment, our inclination is to sign on for now and continue to evaluate the impact on our user base. I suggest that those who are using SP constituent lists use this time to prepare for the possibility we may decide next year to drop these lists.
The fact that S&P is gouging . . . There really is no other word for it, the people with who we regularly deal are powerless to help because SP put its index licensing into a separate profit center group outside of their control or influence — is already starting to do what Economics 101 suggests ought to do; attract competition. I already know of one index provider, Solactive, that has a suite of similarly-targeted market indexes and is competing against S&P on price. Others may surface.
Are they the same as S&P? No. Will your strategies have different results is you switch? Probably. Will your strategies be worse if you switch? They shouldn’t be and if they are, you may have bigger issues to solve than your starting universe. Are the alternatives of lesser quality than S&P. Yes if you ask someone who works at S&P; Who the heck can say? For the rest of the world. But one thong is clear . . . Even the best of the best becomes mundane or crappy if the vendor raises the price high enough.
P123 is not unique. This is an issue impacting the industry as a whole. My long-term forecast: Either S&P will have to moderate their pricing dreams, or they may eventually cease to become the universally accepted “standard” they are today.
So my advice: Even if we do stick with S&P for now, take some time to wean yourself off of it. The laws of economics may wind up forcing your hand, so take whatever interlude you can get to address it gradually.
As to keeping PIT constituents and running forward with alternative info, unless something fell through the cracks as to our rights with the index, the answer is probably “no.” When a license terminates, the departing licensee is typically required to scrub historical data from its systems.