Russell Reconstitution

Discussion in 'Trading' started by trader29, Jun 20, 2009.

  1. trader29


    As most traders know this Friday is when Russell will rebalance their indexes.

    My question: Does Russell make the additions/deletions ONLY at the end of the day on Friday June 26th or do they dollar cost average into the stocks over a few days?

    Thanks for the info and insight.

  2. It's not really the Frank Russell & Company that makes the actual stock transactions, even though they do manage about $125 Billion. They are merely the company that "maintains" the index.

    Portfolio managers that replicate these indexes are the one's that make the changes. Currently, there is $4.4 TRILLION that is tracking roughly 25 Russell indices.

    An update of the "list" was due out this past Friday. Portfolio managers tend to average into ( or out of ) these names over the course of a few days. (The final "list" comes out on June 26th).

    BIG block trades do in fact go up on the last day ( June 30th ), and MOC at that! Makes for some pretty spectacular moves. But keep in mind, brokers usually negotiate huge blocks to be 'crossed' at pre-arranged volume weighted prices, and as a result, price movement can be rather muted and not as "explosive" as one would tend to believe.

    More info here:
  3. overbet


    Russell Reconstitution = Free Money
    Its getting tamer but still lots to be made. My opinion is the index funds that track the Russell try to buy and sell as close to this day as possible to minimize tracking error. However there are the stocks that are illiquid that may have a lot of shares that need to be bought or sold. As an example a stock does 5000 shares a day on average and its being deleted from the Russell 2k so there is a net share to trade of -2,500,00 shares. They may try to start selling this stock earlier by a week or so but not a lot earlier. When you look at the past few months prior to the re balance and see that this particular stock has been doing more than average volume and trending down, chances are this is hedge funds and day traders driving it with the anticipation. Thats what we do anyway and it works well.
  4. some pathetic list for 2009 rebalancing. does anyone know how to play the nasdaq stocks? do nasdaq stocks have imbalances too? how is this played without the specialist?
  5. overbet


    If you mean for imbalances or gaps.....Nasdaq imbalances work but only flash for a second so you will need to write software that captures them when they flash. They are litterally posted for 1 or 2 seconds. As far as gaps I just put LOC orders in. Good Luck today