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What investors should watch ahead of the Nasdaq rebalancing

Nasdaq EVP Lauren Dillard joined Yahoo Finance Live to break down what investors should watch as companies are added to the Nasdaq 100 index

Video Transcript

SEANA SMITH: When we talk about the rise in trading volume this week around the rebalancing not only of the S&P 500, but also the NASDAQ 100, we want to take a closer look at the NASDAQ 100. Six new names getting added as of the close today. And for more on that, we have Lauren Dillard. She's the NASDAQ executive vice president. And Lauren, great to have you on the program. Let's just first, I guess, take a step back, and talk to us about the rebalancing process and how new names get added to the index. Because it differs than from what we see with the S&P.

LAUREN DILLARD: It does. First of all, thank you for having me. It's been a busy day for all of us with these rebalances. Our NASDAQ 100 is entirely rules based. So you can look up and you can see exactly the qualifications to go in and out of our indexes. In fact, Tesla joined the index, for instance, in 2013, based on our rules. So we were excited to have six new entrants today, including Peloton and Okta and Marble and Match. And then we had, obviously, a rotation out. We also have a rotation through the year. We welcomed, actually, Zoom and Moderna both into the NASDAQ 100 over the course of the year.

SEANA SMITH: And when you take a look at the action today and compare that to what we have been expecting going into today, what did you see, and anything that caught you by surprise?

LAUREN DILLARD: Well, look, our markets were made for this kind of activity for certain. But absolutely, you saw record volumes. I mean, with Tesla going in, I think everyone was expecting from a single stock, that was going to have a lot of action. And we saw that. But if you look at what happened, you saw, actually, activity that actually rivaled what we see around the Russell rebalance, which happened in June. And just to give you a sense of that, this last Russell rebalance, we had 1.57 billion shares in 1.46 seconds. So it's a lot of activity at the closing price.

SEANA SMITH: Certainly, and when we take a look at the performance that we have seen this year, the markets have been so resilient. We continue to see new highs here. We saw the three major averages pull back a little bit today. But what do you attribute this resilience that we've been seeing in the markets to?

LAUREN DILLARD: You know, I think it's low interest rates, just like it was previously discussed in your previous section. I mean, investors are wanting access to these companies. There's definitely been a shift into sort of the modern industrial way we're all living. I mean, with Zoom entering the NASDAQ 100, that's an example, and Peloton.

And I think you're seeing investors wanting exposure to that. And you're seeing companies actually want to access the markets, and which is terrific. Because then, the investors can actually have access to that value creation. So we welcomed 300 companies onto the NASDAQ-- into the NASDAQ this year.

SEANA SMITH: Lauren, taking a look at some of the trends that we've seen play out this year, really, the rise of the retail investor. That's kind of gotten lost more recently. But when we saw the pandemic initially come to the US, that, of course, was something we were talking about day in and day out. How do you see that that could-- or how has it changed market dynamics and compared to what we've seen in prior years?

LAUREN DILLARD: Yeah, there's definitely been a rise of the retail online brokers and new entrants to the market, which we should all be glad they're in the market. I mean, we at NASDAQ want it to be a frictionless experience. We rolled out smart investing so that retail investors could become educated, stay in the market. We want them in the market over the long term, so to have a good experience and stay in. But we certainly have seen what we like to refer to as kind of this on-demand finance. Everything else is on demand. Your retail experience should be on demand as well. And we definitely are seeing that.

SEANA SMITH: Lauren Dillard, executive vice president at NASDAQ, thanks so much for taking the time to join us.

LAUREN DILLARD: Thank you for having me.