Bursting the Big Data Bubble by Liebowitz Jay

Author:Liebowitz, Jay [Liebowitz, Jay]
Language: eng
Format: epub
Published: 0101-01-01T00:00:00+00:00

13

QQQ—deliveRing success

ThRough inTegRaTion

oF QuanTiTaTive and

QualiTaTive models

oR “none oF us Is as

smaRT as all oF us”*

JOH N L . J ACOB S

The NASDAQ OMX Group, Inc.®

Contents

13.1 Introduction

161

13.2 Background

163

13.3 The Plan

165

13.4 Wildcard

166

13.5 “Aha Moment”

167

13.6 “The Trend Is Your Friend”

169

References 175

13.1 Introduction

Frank G. Zarb, chairman of the National Association of Securities

Dealers, Inc.® (NASD®), rang the opening bell on the American Stock

Exchange® (AMEX) on March 10, 1999 to celebrate the launch of the

NASDAQ-100 Index Tracking Stock® or QQQ®. It was a milestone in

a project that had already evolved significantly from the original concept, and would eventual y trigger a series of events and outcomes that no one would have been able to anticipate at the time. With seed capital from Susquehanna Investment Group® of $14.49 mil ion, first-day trading volume of 5,232,000 shares, and an opening price of $51.13 (split adjusted),†

* Ancient Japanese proverb.

† Securities Exchange Commission®, The NASDAQ OMX Group, Inc.

161

16 2

John l . JaC obs

it grew to be one of the most heavily traded and popular products in

the world. On the QQQ’s 15th anniversary, assets under management

(AUM) would total $47 bil ion at a closing price of $90.61 on March 10, 2014, with 2014 year-to-date average daily volume of 37.5 mil ion

through March 10, 2014.* In addition, kicking off with notional value of $500M on day one and growing to over $1 tril ion today,† the growth and success of the NASDAQ-100 Index family of products is evident.

More important, the QQQs put exchange-traded funds or ETFs on the

map for retail investors in the United States and launched an index business for NASDAQ OMX. The QQQs became the model of how inves-

tors, traders, arbitrageurs, and hedgers would utilize indexes for trading and investing strategies encompassing a suite of products from ETFs

and funds to sophisticated derivatives that dominate the industry today.

This story fol ows a path, sometimes highly structured, sometimes

highly intuitive, that can be very instructional as a case study in applying strict financial and business modeling versus utilizing intuitive, experiential, and observational inputs. Let’s start at the beginning, which precedes that first opening bell 15 years ago. It actual y dates to early 1997

with the kick-off of the strategic planning process of The NASDAQ

Stock Market® or NASDAQ® (part of the NASD at the time).

NASDAQ’s strategic planning was not a designated staff position as it is today in The NASDAQ OMX Group (NASDAQ OMX®), but rather

a function that was assigned to a line officer to execute in addition to his or her daily responsibilities. The concept was to keep the planning close to those responsible for execution and to those with the best access to the people, information, data, and analyses that were most relevant to the area of study. In 1997, Mark DeNat, vice president of NASDAQ

Operations, was given the responsibility to lead the strategic planning process surrounding NASDAQ’s tactical and near-term response to

changes—both current and possible—in exchange market structure.

I, NASDAQ’s vice president of institutional and investor relations at that time, was given the responsibility to lead the team exploring international and Internet developments and our organization’s tactical and strategic response.

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