NASDAQ-100 Index

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A modified-capitalization-weighted index, the NASDAQ-100 is an equity market index comprising 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Exchange (see Nasdaq 100 stocks). Company weights in the index are based on their market capitalization, and rules exist to limit, or cap, the influence of the largest components on index level. As compared with the S&P 500 and other indexes, the NASDAQ-100 does not include financial companies. It includes companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It also includes companies incorporated in Canada, Israel, India, Singapore, Sweden, Switzerland and Ireland.

The NASDAQ-100 Index should not be confused with the Nasdaq Composite Index; the latter index, which typically is referred to as "the NASDAQ," includes the stock of every company -- more than 3,000 in total -- that is listed on the Nasdaq Stock Exchange.

NASDAQ-100 Index History

The creation of the NASDAQ-100 in January 1985, at the outset intended as publicity for the Index, was by anyone's standards a successful effort. In January 1985, the Index was launched as a way for the Nasdaq Stock Market to support enhanced media coverage for itself. The NASDAQ Financial-100 Index was "born" simultaneously. Unlike the NASDAQ-100, the NASDAQ Financial-100 Index, as its name implies, does include financial companies in its components.

Foreign companies were first admitted to the NASDAQ-100 Index in January 1998, but foreign companies had higher standards to meet before they could be added. Those standards were relaxed in 2002, while standards for domestic firms were raised, ensuring that all companies met the same standards.

The base price of the index was initially set at 250, but when it closed near 800 on December 31, 1993, the base was reset at 125 the following trading day, leaving the halved NASDAQ-100 price below that of the more commonly known NASDAQ Composite Index.

The first annual adjustments were made in 1993 in preparation for the launch of options trading on the the NASDAQ-100 at the Chicago Board Options Exchange in 1994.

Late in 2004, the Amex lost its popular Nasdaq 100 trust listing, which was then known as the QQQ and is now called the QQQQ after its Nasdaq symbol. The shift from one exchange to the NYSE was to occur over a period of time to negate/smoothe any inconvenience to users.[1]

NASDAQ-100 Index Products

The NASDAQ-100 Index is often abbreviated as NDX. Listed products include:


U.S.-Listed ETFs
Name Sponsor Symbol
PowerShares QQQ PowerShares QQQQ
UltraShort QQQ ProShares QID
Short QQQ ProShares PSQ
Ultra QQQ ProShares QLD


Non-U.S.-Listed ETFs
Name Sponsor
NASDAQ-100 Ex ETF IndexChange
Lyxor ETF NASDAQ-100 Lyxor International Capital Management
SGAM ETF Leveraged NASDAQ-100 SGAM Index, S.A.
NASDAQ-100 European Tracker Fund The NASDAQ Funds P.L.C.


Futures and Futures Options
Name Exchange
CME NASDAQ-100 Futures and Options[2] CME Group (formerly Chicago Mercantile Exchange)
E-Mini NASDAQ-100 Futures and Options CME Group (formerly Chicago Mercantile Exchange)


Options
Name Exchange
NASDAQ-100 Index Options[3] Chicago Board Options Exchange
CBOE Mini-NDX Index Options[4] [5] Chicago Board Options Exchange
ISE NASDAQ-100 Index (NDX)[6] International Securities Exchange
ISE Mini-NASDAQ-100 Index (MNX)[7] International Securities Exchange
Mini-NASDAQ-100 Index Options[8] American Stock Exchange


Two futures contracts on the Index are traded solely on CME Group: the standard-sized NASDAQ-100 futures and the smaller E-mini NASDAQ-100 futures, which is one-fifth the size of the standard contract. In addition, futures options are available on both of these products, and CME Group offers other NASDAQ Index products unrelated to the NASDAQ-100.

The NASDAQ-100 Trust Series 1 Exchange-traded fund, sponsored and overseen since March 21, 2007 by Powershares, trades under the ticker NASDAQ: QQQQ. On December 1, 2004, it was moved from the American Stock Exchange where it carried the symbol QQQ to the NASDAQ and given the new four letter code QQQQ. Known also as "the Qs" or "Cubes", it was the most actively traded U.S. security in the United States before Standard & Poor's Depositary Receipts (SPDRS) eclipsed it. Various securities index options are available to investors and traders on the Chicago Board Options Exchange, International Securities Exchange, and, currently, Amex.

Initial Standards for Index Listing

To be included in the NASDAQ-100 Index, a company must meet certain requirements:

  • The security’s U.S. listing must be exclusively on the Nasdaq National Market(unless the security was dually listed on another U.S. market prior to January 1, 2004, and has continuously maintained such listing);
  • The security must be of a non-financial company;
  • The security may not be issued by an issuer currently in bankruptcy proceedings;
  • The security must have average daily trading volume of at least 200,000 shares;
  • If the issuer of the security is organized under the laws outside the U.S., the security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized options market in the U.S.;
  • Only one class of security per issuer is allowed;
  • The issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being Index eligible;
  • The issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn;
  • The issuer of the security must have "seasoned" on NASDAQ or another recognized market (generally, "seasoned" means that the security has been listed on a market for at least two years; in the case of spin-offs, the operating history of the spin-off is considered); and if the security would otherwise qualify to be in the top 25% of the securities included in the Index by market capitalization for the six prior consecutive month-ends, then a one-year "seasoning" criterion would apply.

Standards for Continued Listing

To be eligible for continued inclusion in the Index, the following criteria apply, many of which mirror standards for initial Index listing above:

  • The security’s U.S. listing must be exclusively on the Nasdaq National Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing);
  • The security must be of a non-financial company;
  • The security may not be issued by an issuer currently in bankruptcy proceedings;
  • The security must have average daily trading volume of at least 200,000 shares (measured annually during the ranking review process);
  • If the issuer of the security is organized under the laws outside the U.S., the security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized options market in the U.S. (measured annually during the ranking review process);
  • The security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the Index at each month-end. In the event a company does not meet this criterion for two consecutive month-ends, it is removed from the Index after the close of trading on the third Friday of the following month; and
  • The issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.

Annual December Rebalancing

The index is rebalanced once annually, in December, when NASDAQ reviews companies within the index and makes the necessary adjustments. However, the composition can change at other times during the year if a company is transferred to another exchange, merges with another company, declares bankruptcy, or is delisted by NASDAQ for failing to meet listing requirements. All changes are publicly announced at least five business days before the change is scheduled to take place.

During the annual rebalancing review, share prices (as of the last trading day of October) and components that are in the top 100 of all eligible companies (on the last trading day of November) are used to determine the market values of companies.

Those companies that are in the top 100 of all eligible companies at the annual review are kept in the index, but those ranked 101 to 125 are retained only if they were in the top 100 of the previous year's annual review. If they do not move up into the top 100 in the following annual review, they are dropped. Those not ranked in the top 125 are dropped regardless of the previous year's rank.

A company also will also be dropped if, at the end of two consecutive months, the component fails to have an index weighting of at least 1/10 of a percent. This can occur at any time. Those companies dropped are replaced by those who have the largest market value and are not in the index already. Anticipation of these changes can lead to changes in the stock prices of the affected companies.

References

  1. Amex Losing iShares Listings. TheStreet.com.
  2. CME NASDAQ-100 Futures. CME Group.
  3. Nasdaq-100 Index Options. Chicago Board Options Exchange.
  4. CME E-mini NASDAQ-100 Futures. CME Group.
  5. CBOE Mini-NDX Index Options. Chicago Board Options Exchange.
  6. ISE NASDAQ-100 Index (NDX). International Securities Exchange.
  7. ISE Mini-NASDAQ-100 Index. International Securities Exchange.
  8. Mini-NASDAQ-100 Index Option. American Stock Exchange.

See Also