FTSE 100 Index: Structure, Sector Allocation, and Market Relevance

Highlights

• The FTSE 100 Index tracks the performance of the largest UK-listed companies.

• It includes firms across key sectors such as finance, energy, and consumer goods.

• The index uses a market capitalisation weighting methodology for calculation.

The equity index sector comprises benchmarks that track the performance of selected groups of publicly traded companies. The ftse 100 index represents the leading equity benchmark of the United Kingdom, reflecting the performance of the largest companies listed on the London Stock Exchange by market capitalisation.

Overview of the FTSE 100 Index

The FTSE 100 Index consists of one hundred companies with the highest market values listed on the main market of the London Stock Exchange. These companies are reviewed periodically based on their market rankings, with adjustments made to reflect changes in their relative size and listing status.

Sectoral Composition and Representation

The index features companies from a wide range of sectors including financial services, energy, healthcare, industrials, consumer staples, and telecommunications. This diverse composition ensures that the FTSE 100 Index offers broad exposure to major economic segments of the UK market.

Weighting Method and Calculation

The FTSE 100 Index is calculated using a free-float market capitalisation-weighted methodology. This means that the influence of each company in the index is proportional to its market value, adjusted for the number of shares readily available for public trading. Companies with larger market values have a greater impact on index movements.

Inclusion Criteria and Review Process

Eligibility for inclusion in the index is determined by a set of objective criteria. These include being listed on the London Stock Exchange and maintaining sufficient liquidity and trading volume. Periodic reviews are conducted to assess the standing of each constituent company, with necessary adjustments implemented to ensure the index reflects current market conditions.

Global Relevance and Use in Benchmarking

The FTSE 100 Index is widely recognised as a benchmark for measuring the performance of UK-listed large-cap companies. It is used by market participants to compare sectoral trends and monitor economic indicators across multiple industries represented within the index.

Volatility and Market Dynamics

Fluctuations in the FTSE 100 Index may reflect movements in share prices of its constituent companies. These movements are often influenced by economic data releases, geopolitical events, and sector-specific developments. The index serves as a gauge for the performance of UK-listed equities under various market conditions.

Technological Infrastructure and Data Dissemination

Real-time data for the FTSE 100 Index is disseminated through financial data providers and trading platforms. The infrastructure supporting this process ensures transparent, up-to-date pricing and consistent index calculation, enabling comprehensive tracking of the UK equity market.