Nasdaq Outlines Contingency Plans for Russell Rebalance

Date : 06/11/2012 @ 6:30PM
Source : Dow Jones News
Stock : Nyse Euronext (NYX)
Quote : 45.29  0.0 (0.00%) @ 2:05AM

Nasdaq Outlines Contingency Plans for Russell Rebalance

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--Nasdaq outlines scenarios for determining closing prices on June 22

--Some scenarios would extend trading hours after 4 p.m.

--Stocks involved in Russell "reconstitution" set for heavy volume

NEW YORK--Nasdaq OMX Group (NDAQ) on Monday outlined contingency plans to guide its electronic exchange should internal glitches hit when stocks are added and removed to the Russell indexes later this month.

After the market closes Friday, June 22, Russell Investments plans to complete the annual reconstitution of its widely watched index of 2000 small-capitalization stocks, along with other indexes used to track various slices of the stock market. Heavy trading typically accompanies the changes, because many money managers add and drop stocks to align their holdings with the new index compositions.

Last year, stocks involved in the rebalancing saw double their average volume on the day of the reconstitution, according to Credit Suisse market-structure analysts.

"Nasdaq is highly confident that its systems will provide the reliability and capacity required to ensure a smooth, successful reconstitution," the exchange said in an alert to traders.

Such contingency plans, meant to determine final closing prices, aren't new, according to an exchange spokesman. Nasdaq has outlined contingency scenarios for its Nasdaq Stock Market in advance of the Russell reconstitution for at least six years and says it has never had to implement them. The contingency scenarios have changed little over that time, the spokesman said.

Nasdaq has come under scrutiny since Facebook's (FB) public debut last month, which was marred by trading problems and has provoked ire from many market participants. The exchange has offered proposals for compensating losses, but some trading firms have said they don't go far enough.

On Monday, Nasdaq outlined a handful of alternative scenarios for determining closing prices for its listed stocks should "internal system problems" disrupt the exchange's typical closing mechanism on the day of the reconstitution.

In normal trading conditions, Nasdaq begins to line up orders for the close at 3:50 p.m., and the closing process begins at 4 p.m.

Under several scenarios outlined in Monday's alert, Nasdaq said it could extend trading beyond 4 p.m in the absence of "normal market conditions." In another scenario, the exchange said it would use "alternative venues" to determine closing prices.

Nasdaq said it will hold a joint conference call with officials from NYSE Euronext (NYX) at 3 p.m. June 22 to provide market participants with updates from exchange representatives.

Market participants can reach the call by dialing (877) 430-4664, using the password: RUSSELL.

A spokesman for NYSE Euronext didn't immediately respond to requests for comment.

-Write to Chris Dieterich at;

--Matt Jarzemsky contributed to this article.

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