The Financial Times Stock Exchange (FTSE) 100 Index is an index of 100 of the largest shares traded on the London Stock Exchange. Starting on 3 January 1984 with a base level of 1000, FTSE 100 companies represent about 81% of the market capitalisation of the whole London Stock Exchange. The index is quite unusual in that it re-weights its component stocks daily to represent the actual state of the market. Meanwhile, the index is fully rebalanced (additions and subtractions) on a quarterly basis.
The FTSE 100 Index — also called FTSE 100, FTSE, or, informally, the 'footsie' — is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange. Although FTSE is jointly owned by the Financial Times and the London Stock Exchange, the initials are not an acronym and do not stand for "Financial Times Stock Exchange". They are simply borrowed from FTSE's two parent companies. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. After falling dramatically during the financial crisis of 2007-2010 to a low of below 3,500, the index has recovered by a significant margin, to 6008.32 on 24th December 2010, its highest level since mid-2008.
Overview
The index is maintained by the FTSE Group, an independent company which originated as a joint venture between the Financial Times and the London Stock Exchange. It is calculated in real time and published every 15 seconds.
FTSE 100 companies represent about 81% of the market capitalisation of the whole London Stock Exchange. Even though the FTSE All-Share Index is more comprehensive, the FTSE 100 is by far the most widely used UK stock market indicator. Other related indices are the FTSE 250 Index (which lists the next largest 250 companies after the FTSE 100), the FTSE 350 Index (which is the aggregation of the FTSE 100 and 250), FTSE SmallCap Index and FTSE Fledgling Index. The FTSE All-Share aggregates the FTSE 100, FTSE 250 and FTSE SmallCap.
The constituents of the index are determined quarterly; the largest companies in the FTSE 250 Index are promoted if their market capitalisation would place them in the top ninety firms of the FTSE 100 Index. As of December 2008[update], the threshold for inclusion is about ?1.7 billion. As of December 2008, the five largest constituents of the index were BP, HSBC Holdings, the Vodafone Group, GlaxoSmithKline, and Royal Dutch Shell which were each valued at more than ?60 billion.
Component companies must meet a number of requirements set out by the FTSE Group, including having a full listing on the London Stock Exchange with a Sterling or Euro denominated price on SETS, and meeting certain tests on nationality, free float, and liquidity.
With only historical exceptions, the companies listed on this index must by law include the abbreviation 'plc' at the end of their name, indicating their status of public limited company.
Continuous trading starts at 08:00 and ends at 16:30 (when the closing auction starts), and closing values are taken at 16:35.
Weighting
They involve the total market capitalisation of the companies weighted by their effect on the index, so the larger companies make more of a difference to the index than smaller. This is also called the free float method. The basic formula for any index is (be it capitalization weighted or any other stock index):[1]
* Index level= ?(Price of stock* Number of shares)*Free float factor/ Index Divisor.
The Free float Adjustment factor represents the proportion of shares that are readily available for trading as a percentage of all issued shares. The factor is then rounded up to the nearest multiple of 5% for calculation purposes. To find the free-float capitalisation of a company, first find its market cap (number of shares x share price) then multiply by its free-float factor. Free-float capitalisation, therefore, does not include restricted stocks, such as those held by company insiders.
FTSE 100 "Footsie" in pictures
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