FTSE 100

FTSE 100
Name	FTSE 100
Type	Stock market index
Exchange	London Stock Exchange
Country	United Kingdom
Launched	1984
Operator	FTSE Russell
Capitalization	Market-capitalization weighted

FTSE 100 The FTSE 100 is a leading London Stock Exchange index representing the 100 largest eligible companies by market capitalization. It is maintained by FTSE Russell and is widely referenced alongside indices such as the S&P 500, DAX, Nikkei 225, CAC 40 and Hang Seng Index. Major corporations frequently cited in association with the index include HSBC, BP, Unilever, GlaxoSmithKline, and Vodafone.

History

The index was introduced in 1984 under the auspices of the Financial Times and the London Stock Exchange with methodological input from FTSE Russell and analytics influenced by prior benchmarks like the FT 30 and the All-Share Index. Early listings included multinational firms such as British Petroleum and Royal Dutch Shell which trace roots to historical entities like BP and Shell Transport and Trading Company. Over the decades the FTSE 100 has reflected structural shifts driven by events such as the Big Bang (financial markets), the 1992 Black Wednesday, the 2008 financial crisis, the European debt crisis, and policy shifts in the Bank of England. Prominent corporate actions affecting index composition have involved companies including Barclays, Lloyds Banking Group, Prudential plc, Tesco, and Royal Mail.

Composition and Constituents

Constituents are large-cap companies listed on the London Stock Exchange with primary listings and eligible free floats; examples include AstraZeneca, Rio Tinto, Glencore, British American Tobacco, Diageo, Imperial Brands, Rolls-Royce Holdings, BAE Systems, SSE plc, National Grid, Persimmon plc, Aviva, Sainsbury's, Marks & Spencer Group, Smith & Nephew, Reckitt, Next plc, Experian, Compass Group, Intercontinental Hotels Group, Flutter Entertainment, WPP plc, Royal Dutch Shell plc, Anglo American, Coca-Cola HBC, Smiths Group, and Hikma Pharmaceuticals. International firms with primary or significant UK listings that have appeared include GlaxoSmithKline and Unilever following their corporate reorganizations involving Procter & Gamble-era rivals and regional mergers. Institutional investors such as BlackRock, Vanguard Group, Legal & General, Aberdeen Standard Investments and Schroders hold major stakes in many constituents.

Calculation Methodology

The index uses a free-float market capitalization weighting devised by FTSE Russell with rules influenced by practices from indices like the MSCI World and S&P Global. Market capitalization is computed using share counts drawn from company filings such as reports to the Companies House and disclosures to the Financial Conduct Authority. Adjustments account for corporate actions including stock split, share buyback, merger and acquisition, spin-off, and delisting events. Variants such as the FTSE 100 Total Return parallel approaches used by the Russell 1000 and DJIA Total Return for reinvesting dividends.

Market Capitalization and Weighting

Weighting is proportional to free-float market capitalization, meaning heavyweight constituents like Shell plc, HSBC Holdings plc, AstraZeneca plc, Rio Tinto Group, Glencore plc, Unilever PLC, British American Tobacco plc and BP plc can exert outsized index influence. Market cap levels have been impacted by macro events monitored by institutions such as the International Monetary Fund, the World Bank, and the European Central Bank, and by geopolitical shocks associated with Brexit referendum (2016), the Russia–Ukraine conflict, and commodity cycles driven by companies like BHP Group and Anglo American plc.

Performance and Records

Historic peaks and troughs in index value correlate with episodes like the Black Monday (1987), the Dot-com bubble, the 2008 financial crisis, and recoveries post-COVID-19 pandemic. Records involve milestones in capitalization and returns, often referenced alongside performance of peers such as the S&P/TSX Composite Index, Euro Stoxx 50, and the Nikkei 225. Individual constituent records—such as share price moves by Ocado Group, Rolls-Royce Holdings, BT Group, Ferrari N.V.-related listings, and Informa plc—have altered index volatility. Market commentators from outlets like the Financial Times, The Economist, Bloomberg, Reuters, The Wall Street Journal and analysts at Morgan Stanley, Goldman Sachs, JP Morgan Chase and Barclays track index benchmarks for asset allocation.

Reviews and Rebalancing

The index undergoes quarterly reviews administered by FTSE Russell with special adjustments after corporate events similar to review processes used by MSCI and S&P Dow Jones Indices. Admission and removal criteria consider liquidity, free float, and national incorporation comparable to listing rules enforced by the London Stock Exchange Group and regulatory oversight by the Financial Conduct Authority. Notable rebalances have followed takeovers by firms such as KBR, Smiths Group acquisitions, or secondary listings like Uber Technologies-style moves affecting peer indices. Index committees include experts with backgrounds linked to The Bank of England, major fund managers such as Schroders and BlackRock, and academics from institutions like London School of Economics.

Criticisms and Limitations

Critiques parallel those levied at major cap-weighted indices including concentration risk favoring giants like Shell plc and HSBC, sectoral biases toward energy, financial and consumer staples driven names such as BP plc, Lloyds Banking Group plc, and Unilever PLC. Observers from ShareAction, The Investment Association, PRI (Principles for Responsible Investment), and think tanks like the Institute of Directors note governance, climate exposure, and domicile arbitrage issues involving multinational constituents. Academic researchers from University of Oxford, University of Cambridge, London Business School and Imperial College London have explored survivorship bias, backfill bias, and representativeness compared with broader benchmarks like the FTSE All-Share and global indices from MSCI.

Category:Stock market indices