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Nasdaq's Shame
101–110 of 181 posts
Re: Nasdaq's Shame
#102Earlier quoted context omitted.
Who is contractually obligated to buy?
I have an index fund for NASDAQ with my broker. When I bought into the fund, the broker promised me that with my money, they will buy shares in companies traded on that exchange according to the specific formula that SpaceX is manipulating here. My broker is obligated to buy. They could open a new fund that has a contact like "we'll keep doing what we had been doing except for the whole SpaceX thing" but they would n…
Yeah basically this. These shenanigans water down the value of QQQ. The bottom line is if you don't like QQQ, then dont buy it. Buy the stocks separately or a different index. But for people who don't pay attention, or for people whose 401k's limit their investment options, it is difficult / impossible to avoid the shenanigans
Re: Nasdaq's Shame
#103Earlier quoted context omitted.
There's trillions of dollars sitting in indexes that are quite literally 'passively' invested. Virtually everything holds this bundle in one way or another. Passive indexing has both outperformed and overtaken active investing - leading a lot of money into VOO/VTI/QQQ/etc that track the S&P500 or some other index ("the market"). For retirement funds like 401ks, retail contributes money every paycheck that gets routed…
QQQ is problematic because it’s influenced by strange back room dealings with Space X, if the article is to be believed. VTI is different. It literally tracks all public stocks, weighted by market cap so no such manipulation is possible. If a bunch of people will be forced to buy Space X (QQQ holders), active investors will short the stock in anticipation of market correction and money will flow from those who were f…
QQQ is not in isolation. It’s just a bundle of stocks. Rebalancing that will affect the prices of its constituent stocks, which include some of the highest market cap stocks. Those same stocks are also in many of those other popular market-cap weighted indexes (VTI, VOO, SPY, etc). Price action originating from Nasdaq 100 rebalancing would affect everywhere else those stocks are held. Which is a lot of places.
Except those other indexes won’t have SpaceX. Suggesting any index price moves would be … asymmetric at best.
Now it’s being reported that they’re angling to get SpaceX in the S&P 500 index as well [1]. Maybe if all the indexes get it then it balances out everywhere, who knows. This whole event would be in beyond unprecedented territory.
[1] https://finance.yahoo.com/news/p-weighs-rule-changes-speed-1...
Re: Nasdaq's Shame
#104Lmao inclusion after 15 days is going to throw off the waiting curve on index arb desks.
The market usually prepositions a lot of volume pre-add, so much that the add day is usually a non-event. But they usually have a quarter or more to preposition. 15 days is going to cause so much volatility and chaos.
And the funny thing is, the index arb desks can't really opt out of this - you can't arb all names except one in the index.
What a shitshow this would be if the rules pass as presented by Nasdaq.
Also, does Nasdaq think it's worth killing the reputation of their index for the spacex listing? An index is just a list that everyone agrees on following. Losing public trust in this list could mean the end of Nasdaq 100 as a serious contender. There are many alternatives that could easily take its place.
Re: Nasdaq's Shame
#105Earlier quoted context omitted.
> To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want. I can't imagine "any price they want" is quite right here. At the very least, shouldn't we expect underwriters and other stakeholders (in this case N…
Index funds have a variety of ways to replicate the index beyond physical replication, including options, buying "similar things", sampling etc.. So yeah, they don't really need to stick to 100% of the presented issue.
Index funds and ETFs also have strict replication rules limiting the amount of non-physical replication in their legally binding prospectus...
The more physical a tracker is, the lower the tracking error, but also the more fees you have to pay. "Good" ETFs/IFs are often 98% physical. This makes for higher fees, but more safety for subscribers in case of large swings.
So it's not like they are _free_ to replicate however they see fit, the replication mechanism is part of the product.
Re: Nasdaq's Shame
#106To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% own…
> To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want.
This is not correct and I'm surprised this comment is upvoted to the top. The float is the float, nobody goes to buy shares that aren't available in the float.
Re: Nasdaq's Shame
#107rule wrecked, big one first, just like us gov current did.
Re: Nasdaq's Shame
#108I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?) But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.
Bingo. No sane investor holds QQQ because there is no academic theory behind why it should exist. Why is a stock better if it's listed on NASDAQ instead of NYSE? Can any investor answer this question? Doubt it. If you are into factor investing and you like large cap growth, you buy something like VUG. Most people should just stick with SP500 or total market. However, QQQ had a really good last 15 years and lots of in…
> Why is a stock better if it's listed on NASDAQ instead of NYSE?
The NASDAQ is a stock exchange based in the United States. It’s made up of around 3,500 companies, with a heavy weighting towards companies in the information technology sector.
> If you are into factor investing and you like large cap growth
If you are into factor investing and like large cap tech, you buy something like QQQ.
> No sane investor holds QQQ
The insane can take comfort in their 20% CAGR for the last 10 years on a massive large cap tech expansion.
Re: Nasdaq's Shame
#109Earlier quoted context omitted.
Index funds have a variety of ways to replicate the index beyond physical replication, including options, buying "similar things", sampling etc.. So yeah, they don't really need to stick to 100% of the presented issue.
Index funds and ETFs also have strict replication rules limiting the amount of non-physical replication in their legally binding prospectus... The more physical a tracker is, the lower the tracking error, but also the more fees you have to pay. "Good" ETFs/IFs are often 98% physical. This makes for higher fees, but more safety for subscribers in case of large swings. So it's not like they are _free_ to replicate howe…
What does physical mean in this context?
Re: Nasdaq's Shame
#110[flagged]