Standard & Poor’s said it licensed the S&P 500, the most widely followed gauge of the U.S. equity markets, to Vanguard Group for the creation and listing of Vanguard's first-ever S&P 500 ETF in a move that puts the two companies' past differences in the rearview mirror and is sure to shake up the world of indexing. Terms weren't disclosed.

The licensing agreement also enables Vanguard to launch eight new equity funds and ETFs targeting the growth and value segments of the S&P 500, and the growth, value and blend segments of the S&P MidCap 400 and the S&P SmallCap 600, New York-based S&P said in a press release.

In a separate press release, Vanguard said it plans a total of 20 new ETFs, including the S&P 500 ETF. It said the funds will be based on a variety of indexes, including the Russell 1000, Russell 2000 and Russell 3000 indexes, not just those provided by MSCI. The ETF rollouts, including municipal bond and real estate funds, will take place in the coming year, and Vanguard stressed that the new ETFs will cost substantially less than competing products.

"People will focus on the fact that we brought the S&P 500 product into the marketplace,” Rick Genoni, head of ETF product management at Vanguard, said in a telephone interview. “I think the bigger focus should be on the fact that Vanguard is serious about this business and serious about bringing products into the marketplace that we think will help our advisers and our clients meet their wealth needs.”

The story is big news in the indexing space. S&P and Vanguard famously parted ways after a legal wrangle in 2003, when the two couldn't agree to terms for licensing S&P's indexes. Vanguard transitioned many of its portfolios to the relatively unknown MSCI indexes, and built its ETF platform on that.

This new agreement reflects the two coming to terms and reuniting, and could have far-reaching repercussions in the world of indexing.

“We clearly weren’t able to get the licensing that we were after back then. But we’re thrilled now to say that we not only have that S&P 500 product, but a whole range of products benchmarked to S&P—as well our existing line of MSCI products and now Russell products too,” Genoni said.

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