NASDAQ Next Generation 100

The NASDAQ Next Generation 100 (^NGX ) is a mid cap stock market index. It includes 103 equity securities issued by the 101st to 200th largest NASDAQ-listed non-financial companies; that is, the largest 100 securities outside of the NASDAQ-100 Index. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It is based on exchange listing, and it does not have any financial companies. The financial companies were put in a separate index, the NASDAQ Financial-100.

History
The NASDAQ Next Generation 100 was launched on August 24, 2020. The base price of the index was set at 1,000. The index excludes any companies classified as Financials according to the Industry Classification Benchmark. Since 2011, a total of 54 constituents graduated into the NASDAQ 100, among them Regeneron in 2012, Tesla and Netflix in 2013, Lululemon in 2018, and DocuSign in 2020 (based on the simulation period from December 2009 to August 2020). Over the same timeframe, a total of 63 constituents were demoted from the NASDAQ 100 into the Nasdaq Next Generation 100. As of September 2020, 35 constituents of the current NASDAQ 100 index were onetime members of the Nasdaq Next Generation 100 Index. After the index reconstitution in December 2020, 3 more index members, Marvell Technology, Okta Inc. and Atlassian Corp., joined the NASDAQ 100, taking the all-time total to 57.

Simulated annual returns
The following table shows the simulated annual development of the NASDAQ Next Generation 100 since 2009. The data from December 18, 2009 through August 21, 2020 had been simulated by NASDAQ. The index launched on August 24, 2020.

Investing
The NASDAQ Next Generation 100 is listed as NGX on NASDAQ. At present, the index is tracked by a single exchange-traded fund, the Invesco NASDAQ Next Gen 100 ETF, under the ticker NASDAQ: QQQJ. It began trading on October 12, 2020.

Eligibility Criteria
A security must meet the existing NASDAQ-100 eligibility criteria to be eligible for inclusion in the index. The criteria include being a non-financial company listed on NASDAQ with audited annual financial statements and an average daily trading volume of 200,000 shares. The security must have been listed on the exchange for at least 3 full months. The security may be a common stock or an ADR of a foreign company. The largest 100 ranked issuers by market capitalization that are not in the NASDAQ-100 Index, as of the date of the scheduled annual index reconstitution in December of each year, are included in this index.

Once included in the index, the company must continue to meet the aforementioned criteria. It will be removed from the index if it is acquired. Another scenario for removal from the index outside of the scheduled annual reconstitution is if the company's modified market capitalization falls below 0.10% of the aggregate modified market capitalization of the index for two consecutive month-ends.

Modified Market Capitalization
Initial weights of companies were assigned by dividing each company's market capitalization by the aggregate market capitalization of all securities. Modification of the market capitalization is triggered if any company's weight exceeds 4% of the index as of the date of rebalancing scheduled every quarter.

If the weight of any company exceeds 4% of the aggregate market capitalization of the index, then the weights of all companies greater than 1% are scaled down proportionately towards 1% by enough for the adjusted weight of any company exceeding 4% to be set back to 4%.

The aggregate weight reduction among the companies greater than 1% resulting from the modification will then be redistributed to the companies with weights lesser than 1% in a similar proportionate manner.

As a result of these modifications, the weights of every company in the index may change every quarter during the rebalancing. As a result, the influence of larger companies on the index is capped and smaller companies magnified.

Components
The components of the index as of December 21, 2020, the date of the latest rebalancing, are listed in the table below.

Changes in 2020
In the annual reconstitution in December 2020, 41 new companies were added to the index, including six companies downgraded from the NASDAQ 100 index.