For over 30 years, the entire family of Russell US Indexes has been realigned and recalibrated to reflect market changes in the past year on the last trading Friday each June. Every year brings new challenges. Last year, we awoke on recon day to the surprise Brexit vote outcome with pundits predicting massive sell offs. This year, investors are contending with a completely different geopolitical climate. Fortunately, our index methodology is designed to address unexpected markets and working in concert with our US exchange partners, our reconstitution process ensured this year’s Recon day went as smoothly as it always has. As the CBOE’s Russell Rhoads commented recently, volatility in the Russell 2000® Index in June – the month when Russell US Indexes reconstitution takes place - has actually ranked below average most years over the last decade or so relative to other months.2
The US equity market’s capitalization were larger at this year’s reconstitution as compared to last year, driven by the ‘Trump Bump’ and other factors, and this contributed to healthy volume on the US equity exchanges on Friday, particularly toward the market close. The NYSE trading volume at the end of the day was the largest since 2010, with 1.38 billion shares, or $47.1 billion, across 2,734 stocks executed at the closing auction. And the fourteenth consecutive Nasdaq Closing Cross saw a new record $28.9 billion traded representing 972 million shares across some 2,499 Nasdaq listed stocks (primarily small caps) in the last 0.861 seconds of the Friday US trading day.3
Among the updates for 2017 was a change to rank day. The rank day used to determine Russell US Indexes membership, usually occurring in late May, was on Friday, May 12 this year to help facilitate the alignment in June of FTSE and Russell indexes treatment of shares outstanding and free float measures for index inclusion. In addition, Russell Global Indexes (RGI) were not realigned at this year’s Russell US Indexes reconstitution so they can synchronize with the FTSE indexes in the coming year. These changes are all designed to bring greater consistency for our clients.
We also decided to reserve judgment on a SNAP Inc. (NYSE: SNAP) decision in April when we announced that FTSE Russell will not include the IPO this year in our Russell US Indexes reconstitution. Instead, we are conducting a full market consultation to analyze and assess the impact of admitting companies that attach no voting rights to their offered share classes into FTSE Russell indexes. As The Wall Street Journal reported, the issue is causing concern among shareholders’ rights advocates because founders and executives often end up with far more votes than shares. It’s an important issue that index providers need to resolve by developing a consistent policy to address. The analysis includes a consultation with index users and other stakeholders and will be announced in late July.
Seeing my colleagues celebrate together at the Nasdaq closing bell brought home to me the importance and visibility of the Russell US Indexes reconstitution for the US equity markets and for our FTSE Russell organization. It was only the high level of teamwork and collaboration demonstrated by our global employees that ensured we got the process right for our clients and for the market.
To learn more about our methodology and read the latest research, please visit the Russell Reconstitution page.
 Source: FTSE Russell
 Source: CBOE Options Hub
 Source: NASDAQ & NYSE
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