Financial Times Stock Exchange 100 Index

Financial Times Stock Exchange 100 Index
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Name	FTSE 100
Type	Stock market index
Operator	FTSE Russell
Launched	1984-01-03
Constituents	100
Market	London Stock Exchange
Currency	Pound sterling

Financial Times Stock Exchange 100 Index is a leading share index that tracks the performance of 100 large-cap companies listed on the London Stock Exchange. It serves as a benchmark for blue‑chip UK equities and is widely used by investors, fund managers, and policy makers across Europe, North America, and Asia. The index is maintained by FTSE Russell and has played a pivotal role in linking UK markets with global financial hubs such as New York City, Tokyo, and Hong Kong.

History

The index was introduced in 1984 during a period of financial liberalisation associated with figures such as Margaret Thatcher and institutional changes after the Big Bang (financial services) of 1986. Early market participants included institutions like Barclays, HSBC, Royal Dutch Shell, and Imperial Chemical Industries. Throughout the 1987 Black Monday crash, the index reflected extreme volatility experienced by exchanges in London, New York City, and Hong Kong. It has undergone methodological updates overseen by bodies including The Financial Times, London Stock Exchange Group, and The Economist Group affiliates. During events such as the Dot-com bubble and the 2008 financial crisis, the index composition shifted markedly toward and away from sectors represented by firms like Vodafone Group, BP, GlaxoSmithKline, and Tesco plc.

Composition and Constituents

Constituents must be companies incorporated in jurisdictions such as United Kingdom, Jersey, Bermuda, or Netherlands with primary listings on the London Stock Exchange. Firms commonly included have ranged from AstraZeneca and Unilever to Diageo, Rolls-Royce Holdings, and SSE plc. The index has also featured multinational conglomerates and mining companies like Rio Tinto Group and Glencore. Inclusion and exclusion decisions reference corporate actions involving Acquisitions by groups such as BlackRock, Vanguard Group, and State Street Corporation, and listings connected to Initial public offerings of entities comparable to BP plc spin-offs. Constituents represent sectors highlighted by companies like Barclays, Prudential plc, Legal & General Group, and Aviva plc.

Calculation Methodology

The index uses a free‑float, market capitalisation methodology administered by FTSE Russell. Free float adjustments consider shareholdings held by institutional investors including BlackRock, Vanguard Group, and sovereign wealth funds like the Abu Dhabi Investment Authority and Norwegian Ministry of Finance (the Government Pension Fund of Norway). Calculations are influenced by corporate events involving merger and acquisition activity by groups such as 3i Group and Permira, rights issues by firms like Rolls-Royce Holdings, and demergers akin to historic rearrangements of Imperial Chemical Industries. The governing rules are periodically reviewed by committees with representatives from the London Stock Exchange Group and market participants such as Investment Management Association-type bodies.

Market Capitalisation and Weighting

Weighting is based on adjusted market capitalisation of constituents such as Royal Dutch Shell, BP, HSBC, and British American Tobacco. Large-cap weighting has led to concentration in sectors represented by energy companies like Shell plc and BP plc, as well as financial groups including Barclays and HSBC Holdings plc. Rebalancing and quarterly reviews can change the prominence of firms following corporate actions by entities like Pearson plc, WPP plc, or BT Group plc. Passive investors using index-tracking vehicles from providers like iShares and Vanguard influence liquidity in shares of constituents such as AstraZeneca, Unilever, and Rio Tinto.

Trading Hours and Accessibility

Price dissemination for the index is linked to trading on the London Stock Exchange trading session, with significant activity overlapping with markets in New York City and Frankfurt. Exchange-traded funds and derivatives referencing the index trade on venues such as London Stock Exchange derivatives market, platforms used by firms like Citigroup and Goldman Sachs, and clearing through infrastructures including LCH (clearing house) and Euroclear. International investors access exposure via products from asset managers like BlackRock, Vanguard Group, and State Street Corporation, and through secondary listings on exchanges such as Hong Kong Stock Exchange by some multinational constituents.

Performance and Notable Records

Historic peaks and troughs reflect macro events involving institutions like Bank of England, International Monetary Fund, and shocks such as the 2008 financial crisis and COVID-19 pandemic. Record performances have been associated with recoveries led by sectors where firms such as AstraZeneca and GlaxoSmithKline operate, while declines coincided with stress at banking groups including Royal Bank of Scotland Group and shocks to commodity producers like Anglo American. Index-linked investment vehicles by firms such as BlackRock and Vanguard Group have tracked these performance moves, and headline milestones have been reported by outlets including Financial Times, The Economist, and Bloomberg L.P..

Criticisms and Reforms

Critiques by academics and practitioners from institutions like London School of Economics, University of Oxford, and University of Cambridge have addressed concentration risk related to heavyweights such as Shell and HSBC. Reforms advocated by industry groups and overseen by FTSE Russell and regulators including Financial Conduct Authority have targeted transparency in free‑float calculations and treatment of cross‑listed firms such as those domiciled in Bermuda or Netherlands. Debates have involved asset managers such as BlackRock and Vanguard Group and policy commentators from Institute of Directors and Confederation of British Industry on index governance, corporate governance standards at firms like Rolls-Royce Holdings and BT Group plc, and the role of passive investing in price formation.

Category:Stock market indices