Nasdaq OMX Group, the company behind the Nasdaq exchange, is launching a new “optimized” version of its popular Nasdaq 100 Index that should offer better liquidity than the original benchmark, all while preserving return and volatility characteristics.
The Nasdaq-100 Data Explorers Optimized Index will essentially be a subset of the securities included in the Nasdaq 100 Index—a basket of the largest nonfinancial companies globally—but the new benchmark screens out stocks with low liquidity or those that are relatively expensive to borrow in the share-lending market.
At launch, the new index, which relies on data provided by global stock loan data provider Data Explorers, excluded 18 securities from the original index, the company said in a press release.
“The launch of the NASDAQ-100 Data Explorers Optimized Index offers investors the liquidity of the NASDAQ-100 Index components but with extra measures of liquidity,” Nasdaq OMX Executive Vice President John Jacobs said in a release.
“We believe the application of our screening methodology to the NASDAQ-100 Data Explorers Optimized Index will help investors improve liquidity and manage risk,” Data Explorers CEO Donal Smith added in the release. “We are confident this new index will become a model for the construction of other new indexes and the basis of exchange-traded products.”
The index is the first in what the two companies say is a planned series of optimized indexes. The optimized Nasdaq-100 index will be rebalanced quarterly.
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