A little-known indexing event on Friday will likely result in the year's biggest volume day, with large trading and potential price swings in well-known names like Apple, Microsoft, J.P. Morgan, and Grubhub.
One of the world's largest index providers, FTSE Russell, is rebalancing the large-cap Russell 1000 and the small-cap Russell 2000 indexes. This is a significant annual market event because a lot of money tracks these indexes. Roughly $8 trillion is benchmarked to the Russell indexes, and $1 trillion is passively invested in funds that just attempt to track them. Nearly 10 percent of the money invested in the Russell 2000 is controlled by passive index funds, according to investment banking firm KBW, and when they make large-scale changes piles of money move around.
"It's a sign that indexers are becoming more important in global investment calculations," Alec Young, managing director, of global markets research for FTSE Russell, told me. "With more passive indexers the stakes are going up to make sure we get it right."