MSCI's Operating Assets Test Sparks Billions in Potential Trading Activity

The private index committee that decides which companies make it into major indexes can move billions of dollars in stock trades, even if they don't manage investor cash. The Bitcoin Policy Institute released a paper highlighting this issue, focusing on MSCI's proposed test for 'non-operating companies.' According to the paper, MSCI's simulation would remove Strategy, Metaplanet, and Yellow Cake from major indexes.

MSCI's new screen hinges on 'operating assets,' but the Bitcoin Policy Institute argues that this term isn't defined by US GAAP or IFRS. The institute's Executive Director Conner Brown points out that MSCI expects a decision by October 16, which could have significant implications for funds tracking its indexes.

The paper notes that index providers like MSCI don't actually manage the trillions of dollars in investor cash, but their decisions can still set billions of dollars in motion. The firm writing the rulebook never touches the investor's money, but its decisions can trigger massive trades. This is particularly relevant given the large amount of assets benchmarked to MSCI's indexes, with $21 trillion tied to them.

The Bitcoin Policy Institute argues that reaching MSCI's simulated result requires an analytical reclassification that the consultation doesn't disclose. The paper also examines how this logic might apply to other capital-intensive businesses, such as companies building satellites or lithium mines.