Exchange/Index changes

Discussion in 'Trading' started by aura0663, Jul 7, 2001.

  1. aura0663


    Could anyone suggest a site or resource for stocks that are scheduled to change exchanges,such as Nasd to NYSE, or index additions or deletions? The big ones like KKD and AWE are usually well publicized, but it would help to have some advance notice and awareness of smaller changes. From my limited experience, I have always made money on these plays, especially in the last hour. Would one of you experienced traders take the time to explain this phenomenon to me (besides more buyers than sellers) ?
  2. dlincke


    The reason that stocks that are being added to the S&P500 often ramp towards the close of trading is that lots of index funds track the index and need to have adjusted their holdings at the close at a price no worse than the closing price. Since they are passively managed those funds are absolutely price insensitive but care very much about tracking the index as closely as possible. The ramping towards the close is an attempt to ensure a profitable outcome for the funds as well as the executing MMs. How much of an effect you can expect depends on how much needs to be bought by indexers. However, that's not a straightforward calculation since many indexers also maintain extended market funds and if a new addition is already represented in those funds those holdings will simply be crossed internally without any market impact.

    In addition since these are widely publicized events and there's lots of people trying to take advantage of it the outcome is not always what most people expect. So you should consider yourself lucky if so far you've always made money buying them. Check out FISV, CEFT, or SYK as examples of SPX additions that didn't quite work out as most people expected them to.

    Check out S&P's site for index change announcements. Nasdaq's web site provides similar information for the NDX. However, NDX additions are a lot less reliable to play since there's much less money tracking the index.

    As for pops due to changeovers from the Nasdaq to the NYSE, I believe those are mostly due to increased media coverage in conjunction with the change.