| NEW YORK, June 26
NEW YORK, June 26 Investors can expect a surge
in volume at the close of trading on Friday, when Russell
Investments announces the annual rebalance of its series of
indexes that will affect more than $5 trillion in assets.
The reconstitution requires asset managers to adjust their
portfolios to align with indexes such as the small-cap Russell
2000 and the Russell 3000, which represents most
of the largest publicly traded U.S. companies.
Credit Suisse anticipates about $42 billion will trade on
Friday as a result of the reconstitution, which will make it one
of the biggest trading days of the year in terms of dollar
About $5.2 trillion in assets are benchmarked to the popular
According to Nasdaq, trades in 696.5 million shares
representing $14.1 billion across 2,271 Nasdaq-listed stocks
were executed in 1.7 seconds during its closing cross in 2013.
Russell takes steps during the course of the year to
minimize price dislocations from such a huge trading event. The
indexer does a preliminary ranking of companies from largest to
smallest market capitalizations at the end of May. Finally,
preliminary additions and deletions are listed roughly two weeks
before the final announcement.
"Better that we make it transparent if there is opportunity
for one person to game another," said Rolf Agather, managing
director of global index research and innovation at Russell
Investments in Seattle.
Stock exchanges are also preparing for the size of the
trade, should any technical difficulties arise. Major U.S.
exchanges will hold a conference call beginning at 3 p.m. (1900
GMT) to help monitor for outages or unusual market conditions.
Just ahead of the rebalancing of the Russell Indexes, the
London Stock Exchange said on Thursday that it was
buying the index company for $2.7 billion from Northwestern
Mutual. The purchase will put the LSE in third place in the
growing exchange-traded fund market, ranking behind S&P Dow
Jones and MSCI.
Some of the notable changes so far this year include the
removal of Delphi Automotive and Liberty Global
because they no longer meet Russell's "domicile"
requirement for the United States and have been assigned to
other countries. Tyco International, which was removed
in 2013 after being assigned to Switzerland, is being re-added.
Going forward, Russell may have more determinations to make,
as a result of a flurry of "tax inversion" deals that have taken
place, in which companies such as Walgreen Co have the
potential to relocate outside the United States to qualify for a
lower tax rate. If the majority of a company's revenue comes
from the United States, it may be classified there even if it is
"Russell recognizes what they call 'domiciles of
convenience,'" said Chad Dale, director of index research at ITG
in New York.
"There are always cases where something fits right in a gray
area between things, so there are always judgment calls at
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)