What Is the FTSE 100?
FTSE 100 Index
The Financial Times Stock Exchange 100 Index, also known as the FTSE 100 Index and “Footsie”, is as you probably worked out, a stock market index. It is composed of the 100 largest companies listed on the London Stock Exchange (LSE).
The London Stock Exchange is open from 8am-4:30pm local time (GMT) on weekdays.
Stocks on the index are sorted by market capitalization. In case you are unfamiliar with this term—the market capitalization of a stock is determined by multiplying the number of outstanding shares by the price of a single share. Essentially, giving us the current trading price for a company.
Some of the biggest companies included on the FTSE 100 are HSBC Holdings, Royal Dutch Shell, BP, British American Tobacco and GlaxoSmithKline.
How Was the Index Named?
The name of the index was derived from the names of the creator companies.
The FTSE 100 index is operated by the FTSE Group. And was created in 1995 by the London Stock Exchange Group and former parent of the Financial Times, Pearson plc.
Consequently, giving us the Financial Times Stock Exchange 100 Index.
Other FTSE Indexes
While operating the FTSE 100, the FTSE Group also operates the well-known FTSE 250 Index as well as over 200,000 other indices, including 600 indexes that are available in real-time.
The FTSE Group operates indexes covering the following areas:
- Global Equity
- Fixed Income
- Real Estate
- Alternative Investment
- Responsible Investment
- Investment Strategy.
The FTSE Group generates revenue by charging companies for their rating.
As Will Smale from BBC News commented: “This has led to critics suggesting that the agencies are tempted to give firms over-generous scores in order to win repeat business, something they all strenuously deny.”
FTSE International Limited or the FTSE Group, has offices in London, New York City, Paris, Frankfurt, Madrid, Milan, San Francisco, Beijing, Sydney, Tokyo, Hong Kong and Toronto.
How Is the FTSE 100 calculated?
The FTSE 100 Index value is determined by adding the stock price of all companies included, until we are left with a figure.
When people conclude that the index is either up or down, they are comparing its current price to that of the previous close.
The FTSE 100 Index is calculated continuously during trading hours. Being, as mentioned previously, 8am-4:30pm local time (GMT) on weekdays.
The index is only updated during market trading hours, meaning you will not see a change in price on public holidays and other non-trading days.
FTSE 100 History
The index was compiled on the 3rd of January, 1984, at a base level of 1000. Since its inception, the FTSE 100 has experienced significant highs and lows, as have other stock market indexes globally.
The index is reconstituted quarterly to ensure that the top 100 stocks on the London Stock Exchange continue to populate the index.
Why the FTSE 100 Index Is Important to You
The FTSE 100 Index is a good representation of stock market performance within the United Kingdom. The index houses many large, multinational companies such as British Petroleum (BP). BP is one of the seven biggest oil and gas companies in the world, with a market cap of $US142.14 billion at the time of writing.
The FTSE 100 Index is the most commonly referred to indicator of stock market performance in the United Kingdom and had a market cap of over $US2.66 billion as of January 2018.