Nasdaq ‘Rolls’ Report on Legal Cannabis Industry Data

Nasdaq has begun producing a new report aggregating cannabis sales data from Canada, via a partnership with Cannabis Benchmarks, a division of Stamford, Conn.-based New Leaf Data Services that provides Cannabis spot price indexes and research, to respond to growing demand for information that investors can use as an indicator of market performance for US-based companies or investment funds tied to the cannabis industry, as Nasdaq weighs its options to develop tradable products in the space.

The monthly report, dubbed Cannabis Market Insights and launched on April 20, provides commentary and market fundamentals on the Canadian cannabis industry, including data on consumption of dried cannabis and oil for medical and recreational use, retail sales and store counts, volatility and correlations against other benchmarks, performance of related company stocks, fund flows for exchange-traded funds (ETFs) investing in cannabis stocks, and short interest data.

Though Cannabis Benchmarks does provide similar data on the US market, the legal status of the cannabis industry in the US varies state-by-state, so Nasdaq has chosen to collect data only from the legal Canadian market, and to target the analysis derived from that to provide insight into related stocks and ETFs. Nasdaq supplements the Cannabis Benchmarks data with proprietary information and index data.

The data is designed to support investment by corporate or institutional investors with a specific interest in the industry—such as hedge funds investing in companies whose business is linked to cannabis, or pharmaceutical companies (which may use the data to support research and development activities) and their underwriters—rather than retail investors.

“There are already US ETFs investing in companies that are reliant on the cannabis industry … so the capital markets are already trending toward this space,” says Garrick Stavrovich, lead product developer for Global Information Services at Nasdaq. “The fact that cannabis is a newer economy, and the companies involved are typically newer … means it is going to see more volatility,” meaning there is a need for more insight into this sector, he adds.

The agreement between the companies covers promotion and distribution, and allows the two to explore potential opportunities around data and indexes. For example, Nasdaq has distributed three of Cannabis Benchmarks’ Canadian spot price indexes over its Global Index Data Service since February.

“We did due diligence on a variety of potential partners, and Cannabis Benchmarks stood out as knowing how to build an ecosystem. They had a good vetting process for content—and the quality of the data is paramount,” Stavrovich says, adding that the information provided by other suppliers in this space may not be as credible.

That said, he says Nasdaq may expand the data available in future versions of the report, and would consider partnering with other providers of complementary datasets.

“There is the opportunity to enhance the report, or to create new reports—especially if cannabis becomes legal nationally in the US market,” Stavrovich says. “Further product development, and creating investable products in the future is something we’re clearly interested in … but will probably depend on federal regulation.”

In the meantime, Nasdaq will assess how the new report contributes to growing demand among market participants.