AFTER RELEASING ITS

first two domestic exchange-traded funds on the New York Stock Exchange, the FTSE index company has switched its business to the Nasdaq Stock Market.

On Wednesday, FTSE Americas and PowerShares launched 10 new funds based on new FTSE-RAFI indexes on the Nasdaq. Devised by Research Affiliates, an asset-management firm based in Pasadena, Calif., RAFI which stands for Research Affiliates Fundamental Index measures companies by four fundamental metrics: book value, sales, gross dividends and cash flow. This runs contrary to weighting by market capitalization, the status quo among index makers. Nine of the new ETFs will be sector funds. The last will be made up of small-cap and midcap stocks. All have expense ratios of 0.6%.

Typically, the decision on where to list falls with the fund issuer, in this case PowerShares. But with the exception of the NYSE-listed PowerShares FTSE-RAFI U.S. 1000 Portfolio, all of PowerShares' ETFs list on the American Stock Exchange. But FTSE wanted neither the Amex nor the Big Board for its latest funds.

"We made the business decision based on who would give us stronger market support in this area," says Jerry Moskowitz, managing director of FTSE Americas, based in New York. "The index is our intellectual property and obviously our interest is getting strong interest in the RAFI going out. More eyeballs need to be aware of the RAFI, and it needs more exposure because it has a different weighting than a standard index. While both exchanges have excellent liquidity, where we see additional help is in the area of marketing, getting the information out and making the public more aware of the ETFs."

While the NYSE had supported FTSE well in the past, Moskowitz says FTSE put the new license up for bid because it wanted to get a "reading" on the level of interest and enthusiasm the exchanges were willing to provide to market the new products. He added that the move didn't pertain to future launches, and that FTSE wasn't pulling its two existing ETFs off the NYSE.

Exchanges have been locked in a fierce battle for ETF listings, so the FTSE move is a big blow to the NYSE. "The exchange business in the U.S. has gotten very competitive because their core listings business is an area with limited growth," says James J. Angel, associate professor of finance at Georgetown University. "Sarbanes-Oxley raised the break-even point for being a public company, so a lot of companies that would have gone public a decade ago are not, especially small and international firms. This also applies to carve-outs, that is, divisions companies spin off to the public. For this reason, the exchanges are hungry for business in structured products like ETFs."

It lands a particularly hard punch since FTSE had initially chosen the NYSE for its first PowerShares ETF, then switched gears when it launched the bulk of its offerings.

"The first RAFI ETF was our first product with them and FTSE wanted to list on the NYSE," says Bruce Bond, president and chief executive of PowerShares. "FTSE preferred that environment and the visibility New York gave them."

Nasdaq, though, has its advantages for ETF issuers. Partly because it doesn't have floor specialists providing seed money to support the new funds, ETF issuers historically shunned the Nasdaq as a place to list. But Nasdaq took the opposite tack, arguing that the advantage that specialists bring can also be a risk.

"If all the capital comes from one firm and they have financial difficulty then the ETF company is subject to the problems of that firm," says John Jacobs, executive vice president at Nasdaq. "But if you have multiple firms you don't have that issue and we offer the diversification of multiple market makers."

In addition, Nasdaq pulled out all the marketing stops, telling FTSE it could offer the new ETFs higher visibility. With its Times Square location, Nasdaq can broadcast and promote the funds on its seven-story market tower and offer an opening bell ringing near many media outlets. In addition, Jacobs says the Nasdaq web site gets five times more viewers than the other exchanges.

Bond of PowerShares says the Nasdaq move has been "an eye-opener for a lot of people." Not only are these the Nasdaq's first ETFs from both PowerShares and FTSE, but it's the largest single launch on the stock market, more than doubling the eight ETFs currently listed. By comparison, 101 ETFs list on the Big Board.

This also gives the NYSE a taste of its own medicine. Last November, Barclays Global Investors, the world's leading ETF provider, moved 40 iShares funds to the Big Board from the American Stock Exchange. BGI is expected to pull another 41 ETFs from the Amex during 2006.

The NYSE declined to comment.