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[skyymaster]

Nasdaq launches a 'Cubes Jr.' ETF By John Spence The Wall Street Journal - October 11, 2007 (Copyright © 2007, Dow Jones & Company, Inc.) Get ready for a "Cubes Jr." exchange-traded fund. Nasdaq Stock Market Inc. has started a new index -- the Nasdaq Q-50 -- made up of companies poised to enter the Nasdaq-100 Index, the tracking benchmark for the PowerShares QQQ Trust. The roughly $21 billion PowerShares ETF, which many traders still call the "Cubes" for short and which was previously named the Nasdaq-100 Trust, is often the mostly heavily traded security on any given day. ETFs are baskets of securities, similar to mutual funds but which trade on exchanges like individual stocks. The Nasdaq Q-50 Index is made up of stocks that are next eligible for inclusion in the Nasdaq-100, ranked by market capitalization, the exchange said. PowerShares QQQ's volatility has made it highly popular with traders, even if the ETF has proved difficult to categorize. The basket is still seen as a liquid proxy for technology stocks, even though the ETF has only about a 56% weighting in the tech sector. John Jacobs, Nasdaq executive vice president, said stocks in the new Nasdaq Q-50 Index are "knocking on the door to get into the Nasdaq-100." The companies tend to have smaller market capitalizations and high profit growth, he added. Morningstar Inc. analyst Sonya Morris in her latest review of PowerShares QQQ Trust wrote that the fund is difficult to slot into a portfolio. "It's not a pure tech fund, but it's not diversified enough to use as a core holding," she said. Other critics say building indexes based on which exchange a stock is listed is too arbitrary. The relatively volatile PowerShares QQQ fund often sees dramatic price swings. Following the tech-stock bust, it lost at least 30% for the three years of 2000 to 2002. It has a three-year standard deviation, a measure of how much the price jumps around, of 13.4, according to Morningstar, compared with 7.5 for the SPDR S&P 500 ETF. The launch of the Nasdaq Q-50 Index underscores the efforts of the Nasdaq market and other exchanges to grab a slice of the ETF pie by attracting trading volume and new listings. Nasdaq recently started a market that is specifically designed for ETFs and other index-linked investments. PowerShares QQQ Trust fell harder than the broad U.S. stock market, as measured by the S&P 500, during the summer's credit-inspired swoon. But it's snapped back higher during the recovery. Through Oct. 8, the ETF had a year-to-date return of 24% -- about 12 percentage points higher than the S&P 500, according to Morningstar. In late 2004, the primary listing for the so-called Cubes moved from ETF pioneer American Stock Exchange to the Nasdaq. PowerShares Capital Management, owned by Invesco PLC, this year took over the sponsorship of the fund and renamed it PowerShares QQQ Trust.