What's Behind Nasdaq 100's First-Ever ‘Special Rebalance’?
- The decision driven ‘purely from the regulatory angle’: Lilja
- First of its kind special rebalance to curb overconcentration
The Nasdaq MarketSite in New York.
Photographer: Michael Nagle/BloombergThis article is for subscribers only.
Whatever theories are being proffered as to why index overseers chose to cap the influence of technology megacaps in the Nasdaq 100, the real reason is a simple one.
The special rebalance, the first ever of its kind, is intended to prevent fund managers linked or benchmarked to the index from violating a Securities and Exchange Commission diversification rule. Specifically, it’s one that limits the aggregate weight of the largest stock holdings — those with a 5% representation or greater — to 50%, according to Cameron Lilja, vice president and global head of index product and operations at Nasdaq.