--Nasdaq outlines scenarios for determining closing prices on
June 22
--Some scenarios would extend trading hours after 4 p.m.
--Stocks involved in Russell "reconstitution" set for heavy
volume
NEW YORK--Nasdaq OMX Group (NDAQ) on Monday outlined contingency
plans to guide its electronic exchange should internal glitches hit
when stocks are added and removed to the Russell indexes later this
month.
After the market closes Friday, June 22, Russell Investments
plans to complete the annual reconstitution of its widely watched
index of 2000 small-capitalization stocks, along with other indexes
used to track various slices of the stock market. Heavy trading
typically accompanies the changes, because many money managers add
and drop stocks to align their holdings with the new index
compositions.
Last year, stocks involved in the rebalancing saw double their
average volume on the day of the reconstitution, according to
Credit Suisse market-structure analysts.
"Nasdaq is highly confident that its systems will provide the
reliability and capacity required to ensure a smooth, successful
reconstitution," the exchange said in an alert to traders.
Such contingency plans, meant to determine final closing prices,
aren't new, according to an exchange spokesman. Nasdaq has outlined
contingency scenarios for its Nasdaq Stock Market in advance of the
Russell reconstitution for at least six years and says it has never
had to implement them. The contingency scenarios have changed
little over that time, the spokesman said.
Nasdaq has come under scrutiny since Facebook's (FB) public
debut last month, which was marred by trading problems and has
provoked ire from many market participants. The exchange has
offered proposals for compensating losses, but some trading firms
have said they don't go far enough.
On Monday, Nasdaq outlined a handful of alternative scenarios
for determining closing prices for its listed stocks should
"internal system problems" disrupt the exchange's typical closing
mechanism on the day of the reconstitution.
In normal trading conditions, Nasdaq begins to line up orders
for the close at 3:50 p.m., and the closing process begins at 4
p.m.
Under several scenarios outlined in Monday's alert, Nasdaq said
it could extend trading beyond 4 p.m in the absence of "normal
market conditions." In another scenario, the exchange said it would
use "alternative venues" to determine closing prices.
Nasdaq said it will hold a joint conference call with officials
from NYSE Euronext (NYX) at 3 p.m. June 22 to provide market
participants with updates from exchange representatives.
Market participants can reach the call by dialing (877)
430-4664, using the password: RUSSELL.
A spokesman for NYSE Euronext didn't immediately respond to
requests for comment.
-Write to Chris Dieterich at
christopher.dieterich@dowjones.com;
--Matt Jarzemsky contributed to this article.