September 21, 2018 / 1:04 PM / in a month

Wall St Week Ahead-Expect volume spike on sector reshuffle, quadruple witching

    By Chuck Mikolajczak and Caroline Valetkevitch
    NEW YORK, Sept 21 (Reuters) - An overhaul of Wall Street's
technology and media sectors will coincide with the quarterly
expiration of futures and options, potentially bringing a burst
of volume and volatility to trading on Friday and the days that
follow.
    After the close on Friday, S&P Dow Jones Indices will
reorganize several of its sectors and relaunch its
telecommunications index as a new communication services sector.
    The reorganization by S&P and MSCI of the Global Industry
Classification Standard is expected to involve S&P 500
heavyweights like Facebook Inc, Amazon.com Inc,
Netflix Inc and Google parent Alphabet Inc,
which will drastically alter the weightings of some sectors.

    The telecom sector, currently about 2 percent of
the entire S&P 500, is expected to have a roughly 11 percent
weighting under its new communication services tag. Technology
, with a roughly 26 percent weighting, is expected to
fall to about 20 percent. Consumer discretionary is likely to
drop from 13 percent to about 11 percent.   
    
             
             
     
    On top of the index reshuffling and "quadruple witching"
expirations, S&P will also be implementing the quarterly
rebalancing of its indexes.
    "Trading related to the index shift could generate $30
billion of market activity, but it also comes on a day busy with
other activity, including a quarterly refresh of S&P indexes,"
said Matthew Bartolini, the head of SPDR Americas research at
State Street Global Advisors. 
    Apple Inc, eBay Inc, Comcast Corp
 and Walt Disney Co are among stocks that 
could see the most activity. 
    EBay is being moved from the technology into the consumer
discretionary sector, which will result in fund managers needing
to buy more than 2.7 million shares in the online marketplace,
according to ITG. 
    "The assets associated with the information technology ETF
are greater, so this is actually a net positive for eBay in that
fund managers will have to buy more shares than they will have
to sell," said Ivan Cajic, head of index research at ITG in New
York.
    "It will be a net positive demand for eBay." 
    Apple is expected to remain in the tech sector but will see
its share float fall about 5 percent due to Berkshire Hathaway's
 growing position in the iPhone maker. ITG expects fund
managers will need to sell more than 39 million shares due to
the smaller float. 
    Some strategists expect the sector changes to cause little
disruption to the market because money managers have had a long
time to prepare. S&P Dow Jones Indices announced the overhaul in
November 2017.
    "It has been well, well publicized that they were doing
this, so it should not create all kinds of drama," said Ken
Polcari, director of the NYSE floor division at O’Neil
Securities in New York. 
    "You could have a bunch of volatility, but it is going to be
more about the quad witch."
    Others said reshuffling by exchange-traded funds (ETFs) that
are actively managed may result in higher volatility as managers
rotate money to new areas. 
    Those in charge of actively managed funds could be adjusting
positions for weeks following the sector changes, said Steven
DeSanctis, equity strategist at Jefferies in New York.
    "At the end of the day, large-cap growth managers are going
to be really overweight communications services," he said. 
    "That has some potential to cause some interesting swings
over the next several weeks," DeSanctis said. "A lot of
investment managers try to keep their sector weights within a
certain boundary plus or minus a couple of hundred basis
points."  

    
 (Additional reporting by Trevor Hunnicutt; Editing by Alden
Bentley and Meredith Mazzilli)
  
 
 
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