The FTSE Group specializes in providing indices of publicly traded stocks to its clients. It represents the main index for the London Stock Exchange, providing information on the various industries traded in the market. It also has worked closely with the Dow Jones Industrial index to create a system of categorization for various industries known as the Industry Classification Benchmark.
Function
The purpose of the FTSE is to provide investors with a trusted index that measures a specific section of the stock market. The FTSE works on a broad-based level with a multitude of different indices at the disposal of their clients. They use a system of benchmarks to gauge the performance of many different stocks, mutual funds and bonds. The majority of the companies on the FTSE indices are British in origin since the company's headquarters is Canary Wharf in London, however the FTSE has been expanding into the global market.
Size
The FTSE are the most widely recognized indices in the United Kingdom. The FTSE 100 is generally the standard in judging the performance of the London Stock Exchange. It operates en offices worldwide and has a net income of $3.8 million. The FTSE offers over 100,000 different indices to its clients, all specializing in different markets.
The companies listed on the FTSE 100 must have an income of at least $2.9 billion. The top companies are valued at over $60 billion and include the Royal Bank of Scotland, GlaxoSmithKline, HSBC and BP.
Features
There are many individual indices that the FTSE monitors and operates. The FTSE 100 is a listing of the 100 companies listed on the London Stock Exchange with the most capital in their possession. It consistently covers approximately 80 percent of the market. The FTSE 250 lists the next 250 most capitalized companies, mostly investment trusts that put money into other companies. Two percent of the market is represented by the FTSE SmallCap.
What goes on the indices is determined quarterly, based upon a variety of criteria. A company must be listed on the London Stock Exchange with a price based in Sterling or the Euro and meet the criteria of nationality. They must also pass the free float test, which is weighting a company based on it total market capitalization, giving larger stocks a greater impact to an index than small cap ones.
History
Created in 1962, the FTSE began as a joint venture between the Financial Times and the London Stock Exchange as an index of publicly traded companies. The FTSE 100 was created in 1984, followed by a world index the next year. 1995 saw the FTSE dislodge from its parent organizations and become an independent company, sparking a new period of growth for the index. It opened its first international office in New York City in 1999 with its implementation of the global classification system and in 2001, FTSE spread to Beijing, Hong Kong, Frankfurt and San Francisco. The company then moved into the custom solutions business with global bond indices. Offices in Madrid and Tokyo expanded the company's reach even further, giving rise to corporate governance, investment and hedge indices to round out FTSE. In 2005, the Dow Jones index teamed up with FTSE to develop the Industry Classification Benchmark and the following year the FTSE expanded yet again with an office in Sydney.
Considerations
The FTSE helped create the Industry Classification Benchmark in order to separate markets into various sectors for a better understanding of the macroeconomics of the industries. Its organized into 10 individual industries, divided into 18 supersectors, further divided into 39 sectors and 104 subsectors. The goal of the ICB is to categorize the companies into subsectors that represent their main source of revenue. If a company decides to challenge their classification, the Dow Jones and the FTSE must review and make a final judgment. The overall goal of the ICB is to better understand trends in the various industries.
