August 30, 2016
What You Need to Know About the Markets This Week
Alaric Securities
Wednesday Aug 31: S&P REIT sector spin-off
MSCI and S&P will be changing the classification for REITS, effective on Wednesday August 31.
· REITS will no longer be part of the Financials sector and will instead have their own sector. This will bring the number of S&P sectors to 11.
· This change will impact several financial ETFs that track S&P and MSCI indexes, most notably XLF.
· The amount of selling may be as much as $4bn, with $1bn on Aug 31 and around $3bn on Sept 16 (the GICS structure change will be official on Aug 31, but S&P has decided to implement the changes on Sept 16, to coincide with their quarterly rebalance).
· However, the actual amount may be much less since the largest affected ETF, XLF, announced that it will be implementing the change through a special dividend of XLRE – leaving the decision to retain REIT exposure up to shareholders. This could significantly mitigate selling activity.
Friday Sept 2: Securities to be included in the SEC Tick Pilot program will be established
List will be available on FINRA’s website (http://www.finra.org/industry/oats/tick-size-pre-pilot-data-collection-securities-and-pilot-securities-files) on Tuesday Sept 6.
· This group of securities will be fixed for the duration of the Pilot (through October 2018), but securities may shift between the 3 test buckets within the pilot on a daily basis.
Friday Sept 2: IEX transition to exchange expected to be complete
IEX will be the 13th US equity exchange. There are about 30 active ATS’s.
Finally, how slow will this week be? August’s ADV (6bn shares) is already about 20% lower than the average for the rest of the year (7.6bn). Expect it to go lower.
Source: Credit Suisse Trading Strategy