MSCI rebalance sees closing auction volumes soar by 800%

Euronext, the London Stock Exchange, Deutsche Borse’s Xetra, SIX Swiss Exchange and Nasdaq’s OMX took the top five spots with the former reporting €16.6 billion in volumes.

Closing auction volumes rose by up to 800% yesterday off the back of the quarterly rebalancing of the MSCI Equity Index.

Euronext accounted for around 30% of the market share at the Close, reporting over €16.6 billion, up from around €2 billion from the day prior. The London Stock Exchange (LSE) took second place reporting €9.5 billion, up from just over one.

Nasdaq’s OMX, Deutsche Borse’s Xetra and the SIX Swiss Exchange took the remaining spots in the top five reporting €8 billion, just under €8 billion and €5 billion respectively. In total the top ten venues accounted for €51.7 billion during the Close yesterday, up from six the day prior.

Yesterday’s rebalance went the wrong way, with developed markets reportedly falling 100 bps and several market makers reportedly flagging trades going the wrong way. The rebalance that took place in November wasn’t much better.

The impact of the wider market has been strongly felt with many firms reporting a lack of liquidity because tracker funds from large passive institutions including Vanguard have bought up everything, sources familiar with the matter have confirmed.

Rebalances take place quarterly to maintain an index and ensure its composition remains updated and stays in line with its methodology.

Hedge funds focused on picking off rebalancing indexes such as Tudor have grown in numbers as of late as the business becomes more lucrative and as the passive market has grown.