CRB Index Changes Today

Monday, June 20, 2005

The mother of all commodities indices, the 48 year old Reuters CRB Index has a new format, becoming valid today. Whereas the old CRB Index was an arithmetic average, the new RJ/CRB Index employs geometric averaging with monthly rebalancing. This more accurately represents the effect of trending markets, while still maintaining a uniform exposure to the various component commodities over time.

RJ:CRB Comparison

GRAPH: A comparison of the new RJ/CRB with other commodities indices since 1994
Monthly rebalancing helps maintain the stability and consistency of Index weightings, Reuters said in a presentation file for the new index.
The most significant change in the new RJ/CRB will be a much heavier weigthing of WTI crude oil. Formerly at 5.88 percent this weighting will increase to 23 percent. The most significant downward revision targets silver. The weighting will be reduced from 5.88 percent to 1 percent.
Find the detailed contract specifications for futures on the RJ/CRB here.
For all details of the new index download this .pdf file.
From a NYBOT press release (from May 10):
The renamed Index - the Reuters/Jefferies CRB Index - is the collaborative effort of Reuters and Jefferies Financial Products.
On June 20, 2005, the Index will officially become the "RJ/CRB", undergoing the most significant revision in its nearly fifty year history with changes in weighting, methodology and commodity representation.
Developed in 1957, the Reuters/Jefferies CRB Index is one of the most often cited indicators of overall commodity prices. Originally, the CRB Index was weighted heavily towards agricultural commodities. Since its inception, it has been revised nine times to be more representative of a broader range of commodity prices, particularly energy. This tenth change brings the Reuters/Jefferies CRB in line with the evolution of a rapidly expanding commodity futures market. The RJ/CRB Index continues to offer investors a broad and reliable benchmark for the performance of the commodity sector; it now represents nineteen commodity futures markets, including all five of the NYBOT primary agricultural products (cocoa, coffee, cotton, FCOJ and sugar).
New York's original futures exchange began trading the CRB in its index marketplace in 1986; the name of the index changed to the Reuters CRB Index in 2001. Now again renamed as the Reuters/Jefferies CRB Index, these contracts offer investors direct access to an asset class that may diversify their holdings, improve portfolio returns, reduce overall portfolio risk and hedge against inflation.
Trading in the RJ/CRB will commence on July 11, with the first listed month of September 2005. Effective with this introduction, the RJ/CRB futures will list four months on a quarterly cycle (March, June, September and December). The RJ/CRB contract will also feature a multiplier of $200 times the Index (down from $500 in the old CRB). The new contract size will provide easier access to the Index market. Real time data for the RJ/CRB will be generally available beginning June 20 th under the current CRB trading symbols.
The previous version of the Reuters CRB will be renamed the "Continuous Commodity Index" and will be made available for trading under the symbol "CI" after the close of business on June 17th. All outstanding open positions in the current Index will be rolled into the new product and trade under the symbol "CI". The Exchange will continue to list new months for the CCI.


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