This post is strictly for my own reference, I'm parking it here just in case if it gets wiped out anywhere else:
nasdaqtrader.com
October 30, 2002
Nasdaq-100 Changes to Index Eligibility Criteria
Today, the Nasdaq Stock Market, Inc.® announced changes to the criteria companies must meet to be included in and remain a component of the NASDAQ-100 Index®.
Changes to the criteria for inclusion in the Index include:
Doubling the minimum average daily trading volume criteria to 200,000 from 100,000 shares;
Removing additional market capitalization thresholds for foreign securities;
Requiring a company that has been listed on a public market less than two years to be in the top 25% of the current Index securities by market value for the previous six consecutive months; and
Prohibiting securities from being included if the annual financial statements of the issuer of the securities cannot currently be relied upon.
Changes to the continued inclusion criteria include:
Establishing a minimum market value threshold requiring a security to equal or exceed 0.10% of the Index at the end of each month; and subjecting securities to removal from the Index if they fail to meet this threshold for two consecutive months; and
Prohibiting securities from being included if the annual financial statements of the issuer of the securities cannot currently be relied upon.
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NASDAQ-100 Eligiblity Criteria
Initial Eligibility Criteria
To be eligible for initial inclusion in the NASDAQ-100 Index, a security must be listed on The Nasdaq Stock Market and meet the following criteria:
the security must be listed on the NASDAQ National Market;
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 on NASDAQ of at least 200,000 shares;
if the security is of a foreign issuer1, it must have listed options or be eligible for listed-options trading;
the issuer of the security may not have annual financial statements with an audit opinion which the auditor or the issuer have indicated cannot be currently relied upon;
only one class of security per issuer;
the security must have "seasoned" on NASDAQ or another recognized market (generally, a company is considered to be seasoned if it has been listed on a market for at least two years; in the case of spin-offs, the operating history of the spin-off will be considered);
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" criteria would apply; and
the issuer of the security may not have entered into a definitive agreement or other arrangement which would result in the security no longer being listed on NASDAQ within the next six months.
Continued Eligibility Criteria
In addition, to be eligible for continued inclusion in the Index the following criteria apply:
the security must be listed on the NASDAQ National Market;
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 shares2;
if the security is of a foreign issuer1, it must have listed options or be eligible for listed-options trading;
the issuer of the security may not have annual financial statements with an audit opinion which the auditor or the issuer have indicated cannot be currently relied upon; and
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 will be removed from the Index effective after the close of trading on the third Friday of the following month.
1 A foreign issuer is determined based on its country of incorporation.
2 This is measured annually during the ranking review process.
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NASDAQ-100 Criteria Changes Q&A
Q: When will the criteria be implemented?
A: The new criteria will be implemented on October 30, 2002.
Q: What changes did you make to the criteria?
A: The changes in the initial inclusion criteria include raising the minimum average daily trading volume criteria to 200,000, removing the additional market capitalization thresholds for foreign securities, requiring a company being added with less than 2 years of "seasoning" to maintain its position in the top 25% of the current Index securities by market value for the previous six consecutive months and prohibiting securities of an issuer from being included if the issuer's annual financial statements cannot currently be relied upon. The criteria have been revised to include a separate section on the continued inclusion criteria—previously the continued inclusion criteria were incorporated within the criteria as a whole. The sections have been broken apart to make it clearer. New continued inclusion criteria include a minimum market value threshold and the same requirement that securities may not be included if the issuer's annual financial statements cannot currently be relied upon.
Q: Why are the criteria changing?
A: The criteria are changing so that the Index more accurately reflects the largest, non-financial companies listed on NASDAQ.
Q: What are some possible ramifications of the changes?
A: The new criteria will likely result in more timely changes to the Index. For example, components that represent a less significant portion of the Index as a result of reductions in market capitalization will be addressed throughout the year. In addition, since higher market capitalization thresholds for foreign securities are being removed more foreign issuer securities may become eligible to be included in the Index.
Q: Will these changes affect the annual ranking of the Index?
A: These changes will become effective on October 30, 2002 and will be applied in determining the securities to be included/excluded in the annual ranking in December, 2002.
Q: Is it too late to adopt these criteria—many companies have already negatively impacted the Index?
A: It is never too late. These new criteria will assist us this year and in the future to more accurately reflects the largest, non-financial companies listed on NASDAQ.
Q: The criteria have been broken into 2 sections—initial and continued eligibility criteria. Was there continued eligibility criteria previously?
A: There were some continued eligibility criteria previously but they were incorporated with the initial eligibility criteria. To make it easier to understand the criteria has been separated into two sections.
Q: Companies below the 0.10% market capitalization threshold will be removed. Won’t annual turnover be high?
A: It is not anticipated that the annual turnover will be significantly impacted. Instead, the timing of the changes will be more uniformly distributed throughout the year.
Q: Will the minimum weight threshold timing be reset each year so that it starts each January?
A: No, the minimum weight threshold will be a rolling 2 month period at month end beginning October 31, 2002. For example, if the company is below the threshold in December and January it would be removed in February.
Q: Why is the average daily share volume criteria for domestic issuers being raised?
A: The previous average daily share volume criterion of 100,000 shares was adopted in 1995. Since that time, share volume has grown significantly. This change is in keeping with a portfolio reflecting among the most liquid stocks listed on NASDAQ.
Q: Why is the standard for foreign securities changing?
A: NASDAQ is a global market and consistent with this certain higher criteria previously applied to foreign securities have been removed. Foreign securities are no longer held to higher market capitalization and trading volume requirements. As revised, they must have listed options or be eligible for listed options trading in addition to the criteria currently applied to all securities. A determination that a security is a foreign security will be based solely on the issuer’s country of incorporation.
Q: What does "seasoning" mean?
A: "Seasoning" is generally used to define the time that the company has been listed on a recognized market. Securities included in the Index must be seasoned on NASDAQ or another recognized market for at least two years. In the case of spin-offs, the operating history of the spin-off will be considered. Notwithstanding this, if a security’s market capitalization would have qualified it in the top 25% of Index securities for the six prior consecutive months, then a one-year “seasoning” criteria would apply.
If you have questions regarding these changes, please contact Lisa Chaney, Financial Products, at (301) 978-8281 or Lyuda Kareva, Financial Products, at (301) 978-8290. |
