Russell 2000

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The Russell 2000 Index has become the standard benchmark for small-cap stock performance on U.S. markets. The Russell 2000 represents the bottom 2000 companies in the Russell 3000 Index by market capitalization.

History

The Russell 2000 and other members of the Russell index family were created in 1984 by asset manager Frank Russell Company (now Russell Investments) as "a better measurement of money manager success".[1] It is now the most widely-quoted benchmark for small-cap stock performance in the U.S.[2] and went international as the U.S. small-cap component of the Russell Global Index.

The Intercontinental Exchange (ICE) had an exclusive deal to list Russell-based futures and options on futures that began in the third quarter of 2008. ICE transitioned the Russell Index futures to ICE Futures U.S. (formerly the New York Board of Trade) in September of 2008. However, the contract expired in July of 2017 and a new agreement between CME Group and the London Stock Exchange Group went into effect to list Russell index derivatives contracts previously listed only on ICE. The agreement gives CME Group an exclusive license to offer futures, options on futures and cleared over-the-counter products based on FTSE and Russell indexes for 12 years. CME launched the E-mini Russell 2000 Index futures and options suite on July 10, 2017, but for a period of time during the transition the products will be dually listed by CME and ICE.

Trading and investing

The Russell 2000 Index is very popular with equity investors, including active traders, because it contains smaller (market cap $100m-$1b), more volatile stocks trading with high liquidity and low costs.[3] Typical vehicles for trading the Russell 2000® are exchange-traded funds (ETFs) like the low-cost iShares Russell 2000 Index (IWM),[4] and the Mini-Russell 2000 Index, traded on the International Securities Exchange (ISE) and based on one-tenth of the full value.[5]

Trading derivatives on the Russell 2000 Index expanded rapidly in the mid-2000s and created trading shakeups along the way. The CME Group lost its right to trade such contracts to the Intercontinental Exchange (ICE), which began listing Russell index contracts, including its ICE Russell 2000 Index, in September 2008.[6]

CME instead lists e-mini futures trading of the Russell 2000's main competitor, the S&P SmallCap 600 Index.

References

  1. Corporate Timeline. Russell Investment Group.
  2. Russell 2000 Index. fool.com.
  3. Russell 2000 Index. StreetAuthority.com.
  4. iShares Russell 2000 Index. Google Finance.
  5. Mini-Russell 2000 Index. International Securities Exchange.
  6. ICE Poaches Russell futures contracts from CME. Index Universe.
Last modified on 11 July 2017, at 02:52