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QQQ coming of age detailed in Nasdaq-100 white paper


March 1999 saw the launch of the first ETF tied to the Nasdaq-100 index, the QQQ. In celebration of the ETF’s birthday, the Nasdaq-100 has published a white paper detailing the index’s growth since its inception over 30 years ago. 

While the Nasdaq-100 is home to some of the most well-known names in technology – including Apple, Microsoft, Alphabet, Intel, and Facebook—the index also includes category-defining companies on the forefront of innovation in other key industries such as Amgen, Starbucks, and Tesla.

Since the introduction of index options in 1994, a wide assortment of financial products that track the Nasdaq-100 have been made available to investors. In total, notional value of all financial instruments that follow the index exceeds USD1 trillion. The Nasdaq-100 also serves as the basis for many investable securities, the largest being the PowerShares QQQ ETF (Nasdaq:QQQ).

The current value of this and related exchange-traded products exceeds USD50 billion, making the Nasdaq-100 one of the most widely tracked indexes in the world.

In terms of the QQQ, while the Nasdaq Stock Market served as the initial ETF sponsor, this role would be transferred to Invesco PowerShares in 2007. The firm writes that as is the case with the SPDR S&P 500 ETF, QQQ employs a system by which shares could be created or redeemed by authorised participants. Arbitrage opportunities would ensure that the ETF tracks the index.

The ETF experienced astonishing growth during its first few months of operation, a signal of the demand for this particular product as well as a harbinger of the forthcoming explosive growth in the number of exchange-traded products.

On March 10, 1999, QQQ was launched with a per-share net asset value of about USD100. At the close of that day, the fund had about USD15 million in assets. By the end of March that figure had risen to USD658 million. Fund assets surpassed USD1 billion by the mid-April, and USD2 billion by mid-August. By the time of the market peak in March 2000, fund assets reached USD10 billion. The ETF did a two-for-one split at that time, an interesting irony in light of the forthcoming market drop, the firm writes.

The remarkable growth of the fund between fall 2000 through spring 2001, in spite of the market meltdown occurring at the time, allows conjecture that the demand from investors for the ETF was far beyond that as a buy-and-hold investment vehicle. The firm says that the ETF ended up being used as a hedging or speculation vehicle for traders wanting exposure to ‘tech’ stocks. “It is clear that QQQ, as has been the case for some other ETFs, has become a useful trading vehicle as well as investment vehicle,” the firm says.

You can read the white paper on the Nasdaq-100

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