Where a index-rebalance adjusts weights, reconstitution rewrites the list. The provider takes a snapshot of market values on a fixed rank day, publishes preliminary lists, then applies the changes on a single effective date. Small cap indices see the most churn because the boundary between size bands runs through a crowded part of the market.
Reconstitution day is routinely the highest-volume session of the year in US equities, since growth and value assignments shift alongside membership.
Example: on rank day a company is the 995th largest and enters the large cap index, exiting the small cap index. It must be bought by funds tracking one benchmark and sold by funds tracking the other, on the same close.
Related: index-rebalance, index-inclusion, index-effect, closing-auction, index-provider