Nasdaq Announces Special Rebalancing of Nasdaq 100 Index
July 7, 2023 – Nasdaq has announced that it will conduct a special rebalancing of the Nasdaq 100 index, which will come into effect before the market opens on July 24. The move aims to limit the influence of large companies, with the three largest companies currently holding more than a 30% share in the index, according to CNBC.
The Nasdaq 100 index is a popular growth index that includes the top 100 non-financial companies traded on the stock exchange and is seen as a barometer for growth companies. Since the beginning of the year, the index has gained approximately 37%, significantly outperforming the S&P 500 and Dow Jones indices, which include the stocks of thirty leading American companies.
Nasdaq stated that the special rebalancing of the index aims to “address excessive concentration in the index by redistributing weights.” The index is regularly adjusted on a quarterly basis.
The three largest positions in the index are currently held by Microsoft, Apple, and Nvidia. The price of Nvidia’s shares has nearly tripled this year alone. The top ten companies in the index represent a combined weight of approximately 59%.
This rebalancing is the third in Nasdaq’s history. The company announced that the new weight distribution will be announced on July 14.
Cameron Lilja, Director of Nasdaq’s index products, stated, “The special rebalance is part of the Nasdaq 100 index methodology and ensures that index funds adhere to diversification rules. The special rebalance of the Nasdaq 100 has also been conducted in 2011 and 1998.”
The rebalancing of the Nasdaq 100 index reflects the growing concern over the concentration of power in the hands of a few large companies. By redistributing weights, Nasdaq aims to maintain the index’s representation of a diverse range of companies and ensure a fair and balanced market for investors.
What is the reason behind Nasdaq’s decision to conduct a special rebalancing of the Nasdaq 100 index?
Nasdaq Shakes Up Nasdaq 100 Index to Tackle Concentration Concerns
In a move to address concerns over excessive concentration, Nasdaq has announced a special rebalancing of the Nasdaq 100 index. The rebalancing, set to take effect on July 24, aims to limit the influence of large companies that currently hold over 30% of the index’s weight.
The Nasdaq 100 index is a popular benchmark for growth companies, including the top 100 non-financial firms traded on the stock exchange. So far this year, the index has outperformed both the S&P 500 and Dow Jones indices with a gain of approximately 37%.
Nasdaq’s decision to conduct this special rebalancing reflects a growing concern over the concentration of power within a handful of large companies. By redistributing weights, the exchange aims to ensure a fair and balanced market for investors.
Currently, the three largest positions in the index are held by Microsoft, Apple, and Nvidia. Nvidia in particular has seen a significant surge in its share price this year, nearly tripling in value. The top ten companies in the index collectively account for around 59% of its weight.
This rebalancing will be only the third in Nasdaq’s history, following similar actions taken in 2011 and 1998. The details of the new weight distribution will be announced on July 14, allowing market participants to prepare accordingly.
Cameron Lilja, Director of Nasdaq’s index products, emphasized that this rebalancing is an integral part of the Nasdaq 100 index methodology, ensuring that index funds adhere to diversification rules. The goal is to maintain a diverse range of companies in the index, reflecting the dynamic nature of the market.
Market participants will be eagerly watching how the rebalancing affects the performance of the Nasdaq 100 index and its constituent companies. With the rapid growth in technology stocks over the past year, this rebalancing is seen as a necessary step to maintain the index’s representativeness and provide a level playing field for investors.
This special rebalancing of Nasdaq 100 Index is a much-needed step to level the playing field and prevent the dominance of large companies. It ensures fair representation and encourages diversity within the index. Kudos to Nasdaq for taking proactive measures to benefit investors.