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by siren2026 5 days ago
> But for NASDAQ 100 I'm going to go ahead and say this was a brilliant market move, since nobody ever talked about that index before this.

Most people know the NASDAQ100 as its ticker QQQ. Also known as the high risk - high reward investment.

After reading how Nasdaq changed the rules in order to court all the mega IPOs to list with them, I will never ever consider a Nasdaq fund again. The rule change about the available float is especially shocking.
1 comments
JumpCrisscross 5 days ago
> After reading how Nasdaq changed the rules in order to court all the mega IPOs to list with them, I will never ever consider a Nasdaq fund again

We have zero evidence for that chain of causation. And we have zero evidence of significant outflows for NASDAQ 100 since this rule change. (There is early evidence of inflows, but I suspect that's just because nobody talked about the NASDAQ 100 before and this turned out to be a brilliant marketing move.)

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siren2026 5 days ago
I agree with you that this might be a good marketing move overall.

And I don't really care about the chain of causation. The change of rules for the available float and the fact those funds will buy based on the market cap and not the float makes it a completely irresponsible investment at this point.

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JumpCrisscross 5 days ago
> fact those funds will buy based on the market cap and not the float makes it a completely irresponsible investment at this point

It's an index. The conventional way to market weight is to use market cap. The float rules are mostly for technical reasons around transaction costs for very large indices. There is a theoretical argument for float weighting, inasmuch as if you bought the stock market you'd be buying the float, not all of all of the companies. But I haven't seen research to say one way is definitively better than the other.

I agree they should have probably paired the float-rule change with a gradual onramp. But again, NASDAQ 100 isn't big enough to really need to care about this. (Half a trillion is obviously a lot of money. But not relative to the equity markets, and not when spread across a hundred of the largest names.)

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siren2026 5 days ago
> It's an index. The conventional way to market weight is to use market cap. The float rules are mostly for technical reasons around transaction costs for very large indices.

No the float rule is to avoid having to buy so much stock compared to the available stock that it would create irrational prices. This is probably going to happen with those IPOs. It's pure offer and demand!

To put it differently: Imagine a company is valued at 100B$ but only released 1% of its stock for sale (1B$). The NASDAQ100 includes it in its index based on the market cap only and because of that now needs to own about 100m$ of that stock. You are now trying to buy 100m$ out of only 1B$ available stocks. Prices are going to skyrocket artificially. If it was weighted on the float, it would only have been required to buy 1m$, which would make way more sense.

And an index can be whatever the company behind it wants it to be. The SP500 can decide absolutely whatever they want and every index fund will just have to agree and comply and buy based on those decisions.

But as everything if they do something stupid they lose credibility and customers. This is one of those instances in which they changed the rules in a way that made no clear sense and they will be remembered for that.

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JumpCrisscross 5 days ago
> No the float rule is to avoid having to buy so much stock compared to the available stock that it would create irrational prices

Correct.

> this is probably going to happen with those IPOs

Not due to any index-following investor.

> SP500 can decide absolutely whatever they want

Yup, S&P 500 is a committee-based index.

> one of those instances in which they changed the rules in a way that made no clear sense and they will be remembered for that

S&P never changed the S&P 500's rules.

NASDAQ 100 did. But from what I can tell, that was a brilliant piece of marketing. Nobody talked about them before. (QQQQ doesn't appear to have gained or lost net assets in that time, which isn't unexpected, it's a volatile fund.)

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