> absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis

As a business, sure. As a committee, it’s still a deeply technical process. I can say with a lot of confidence that optics weren’t considered in any of this, possibly to a fault.

> and a nontrivial portion of the U.S. economy

This vastly overstates the amount of assets tied to the S&P 500. It’s a lot. But it’s a strong minority of equity exposures.

Once you have an index, you can offer all sorts of products around it.

-You can offer a return swap to an investor so he can "invest" in the index. You can alternatively build a whole list of derivatives and products around it and offer them to investors instead (think Itraxx,Vix,etc)

-A fund manager can use it as his benchmark and you get to see if he is good or not.

-If its a factor index you can now use it for risk management and return attribution.

The key thing today is that creating a new index that isn't a fad is very hard. There has also been a lot of consolidation of indices into few players (SP, MSCI, Bloomberg) as it's obviously an economies of scale business.

> Is that why people spend time, money and effort creating and maintaining them? They're just broadcasters?

Yes. There are more indices than there are stocks. Publishing an index is, business wise, a game of getting funds to license them.

I mean, they get paid for it, sometimes quite a lot, for this "broadcasting". $100mm of AUM gets you like $200k profit/yr. (Like $500k minus fees)

Exactly. The S&P 500 isn't a fund, but let's not pretend that inclusion in the index doesn't mean real money is at stake.

> Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia.

This is a common misconception. The S&P 500 weights allocation by float-adjusted market cap, not by total market cap. In the case of SpaceX, they are planning to float ~4% of shares at IPO. Even if SpaceX was added to the index, its index weight would be based on that tiny float, and at a $1.75T valuation it would be treated as roughly a $70 billion company.

SpaceX weight would be ~0.125% of the index, not ~2.5% as you imply.

except $4T is a made up number, a complete fantasy not rooted in any reality. it us more like $750bn (this is also made up number) :)

The problem with your framing of "users of S&P500 are not interested overpriced IPOs" is that it conflates two fundamentally different things: what an index describes vs what investors prefer. The moment you start filtering out parts of the market based on investor appetite vs market reality, you stop building an index and instead start creating an actively managed product. That's active investing. It's no longer an index.

The S&P 500 is used as the benchmark of the market by practically everyone. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know. If the benchmark that everyone uses as a market proxy is systematically excluding a substantial part of the market, then the gap betweeen "the index" and "the market" has real consequences.

You can't have it both ways: Either the S&P 500 is a market proxy, in which excluding parts of the market is a problem; or it's a curated slice, in which everyone needs to stop it as the default benchmarket for the market.

I feel like a lot of people discussing here have no clue what they're talking about, they just have an opinion - which, combining both, most likely means it's an opinion they did not form themselves.

The rules for index inclusion absolutely make sense in many ways.