Nasdaq 100 is set for special rebalance to reduce overconcentration Nasdaq 100 is set for special rebalance to reduce overconcentration Nasdaq 100 is set for special rebalance to reduce overconcentration

Nasdaq 100 is set for special rebalance to reduce overconcentration

Equities 4 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  The Nasdaq-100 Index is set for a special rebalance effective before the open on the 24 July 2023 in order to address the overconcentration by the five largest securities in the index. The special rebalance will trigger around $9.6bn in rebalancing traded value by the 24 ETFs listed in the US and Europe tracking the Nasdaq-100 Index. The underlying equity valuation of these securities is not impacted by the special rebalance and the rebalancing should in theory not have a significant price impact based on our estimates.

Key points in this equity note:

  • The US stock exchange Nasdaq will implement a special rebalance of its Nasdaq-100 Index to address overconcentration in the top five securities Microsoft, Apple, Nvidia, Amazon, and Tesla. The special rebalance will be effective before the open on the 24 July 2023.

  • There are 24 ETFs tracking the Nasdaq-100 Index with a combined AUM of $271bn. Assuming the combined index weight in the five largest securities is reduced to 40% this will cause a rebalancing of $9.6bn in those ETFs.

  • Based on benchmark models for transaction cost analysis, the price impact should theoretically be small with the least price impact expected in Tesla shares and the largest impact in Microsoft shares.

A special rebalance to address overconcentration

On Friday, the US stock exchange Nasdaq announced that the Nasdaq-100 Index will undergo a special rebalance effective prior to the market open on Monday the 24 July 2023. The aim is to address overconcentration in the index by redistributing the weights and the special rebalancing will not result in removal or addition of any securities. Nasdaq refers to the methodology paper of the Nasdaq-100 Index for its decision. It says clearly on page 4 that in the event that the five largest securities in the index, with individual weights exceeding 4.5%, have a combined weight above 40% the five largest stocks will be brought down to a combined weight to 40% in the quarterly weight adjustment. In the annual weight adjustment the combined weight would be set to 38.5%.

The special rebalance will be based on shares outstanding as of 3 July 2023 and the index share announcement and pro-forma file release of the weight changes will take place on Friday the 14 July 2023 allowing market participants five trading sessions to meet the new target weights.

Rebalancing should not theoretically not have an impact

As with stock splits and dividends these events do not change the underlying equity valuation of the securities and thus new stories yesterday suggesting the top five technology stocks in the Nasdaq-100 Index were down due to the announcement is a bit silly. Given the underlying value has not changed any front-selling of shares in advance of the special rebalance should theoretically be met by bids as the underlying value has not changed. Despite this obvious fact one could still make the case that forced selling by passive ETFs tracking the Nasdaq-100 Index could move the market.

The table below shows the 8 largest securities in the Nasdaq-100 Index as of 3 July 2023 with the top five securities being Microsoft, Apple, Nvidia, Amazon, and Tesla. These five securities had a combined index weight of 43.55% on 3 July 2023 and thus were in violation with the index methodology at the time of the quarterly rebalancing.

The combined asset under management in ETFs listed in the US and Western Europe tracking the Nasdaq-100 Index is $271bn with the Invesco QQQ Trust Series 1 ETF (QQQ:xnas) being the largest fund with $202bn in assets. As the table below shows the new target weights, assuming the top five securities will be limited to 40% index weight, will lead to estimated $9.6bn in rebalancing value among the 24 ETFs tracking the Nasdaq-100 Index. Based on the past 20-day average daily traded value and a smooth rebalancing over five trading session the volume participation from these ETFs is expected to be maximum 6.67% in Microsoft shares and minimum 0.5% in Tesla shares.

Using the benchmark model for estimating transaction costs we can see that rebalancing Microsoft shares over five trading days would cost the Invesco QQQ Trust Series 1 ETF, the largest ETF tracking Nasdaq-100, approximately 33 basis points in trade costs and multiplying by the index weight the cost would be around 3.5 basis points for this ETF. Rebalancing Amazon and Tesla shares will be no problem for these ETFs. Overall, we estimate low impact from the special rebalance.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.