Comment by mamonster

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.