Index provider Standard & Poor's (S&P's) has signed a Memorandum of Understanding (MOU) with the Shenzhen Stock Exchange ("SzSE") in China to cooperate on index development and product listings.

According to the MOU, SzSE will authorise S&P's to use its securities information to create and launch a series of investable and benchmark indices in China.

As part of the agreement, S&P's will license its flagship S&P 500 Index to SzSE to develop and trade a listed open-ended fund through the Qualified Domestic Institutional Investor program, a system whereby domestic Chinese institutional investors are allowed to invest in overseas markets under a quota system.

The fund will be issued and managed by China Southern Fund Management Co., Ltd.

Alex Matturri, head of S&P's Index Services, said: "With a market capitalisation of approximately US $3.5 trillion, China is now one of the most important and closely watched markets in the world. The critical role played by the Chinese stock exchanges in this growth story certainly cannot be overlooked."

S&P's is the first major independent index provider to sign an MOU with SzSE since SzSE announced a set of rules that stipulate how securities information of SzSE can be used by third parties to compile and commercialise indices on April 1, 2009.

Globally, there is more than US $4 trillion benchmarked to the S&P 500 Index, with indexed assets making up more than US$ 1.5 trillion of this total.