Benjamin Felix

NASDAQ, when I originally wrote these notes down, they did have a 10% minimum float and they weighted stocks based on the value of all listed shares of the company with no regard for free float.

So that's pretty interesting.

But they had this whole index consultation process, which some other index providers are also doing publicly, like FTSE is in the process of a public consultation right now.

They're requesting people to write in about potentially making changes to their indexes.

S&P, as I mentioned, is apparently considering doing this, but they haven't made a public consultation as far as I know.

So NASDAQ though was an outlier.

So they did have a minimum float, which was not an outlier, but they valued for weighting companies in their index.

They used the total capitalization with no regard for free float.

Now in their consultation, one of the things they changed, or well, a few of the things they changed, they did eliminate the minimum float.

So now you could have a 1% float and technically be included in the NASDAQ 100 index.

And then they introduced a float factor in their weighting of low float stocks.

I want to talk a little bit more about that because Dan, you and I were chatting about this before we started reporting.

A lot of the speculation about Nasdaq making these changes was that they were trying to change things to increase the weight of low float companies in their index.

But NASDAQ actually calls this out specifically in their concluding remarks, summarizing their consultation process.

So they say some respondents in their analysis of the impact appeared to assume that the index, that the NASDAQ 100 index is currently free float weighted.

However, this does not reflect the current methodology.

As noted in the consultation, index constituents are currently represented at the full market capitalization of eligible listed shares without regard to free float considerations.

Accordingly, the proposed low float security weight adjustment not to exceed the full listed market capitalization would represent a more conservative weighting approach than the one currently in place rather than a more aggressive one.

So they've limited the 10% cutoff for minimum float.

So it'll take any level of float, but they have adjusted the way that they weight securities to be more conservative for low float stocks, not more aggressive, which is different from a lot of the perception while they were in their consultation process.