What Is the Financial Times Stock Exchange Group (FTSE)?
The Financial Times Stock Exchange (FTSE), now known as FTSE Russell Group, is a British financial organization that specializes in providing index offerings for the global financial markets. The London Stock Exchange Group (LSEG) owns the FTSE Russell Group. In addition to the FTSE Russell Group, the LSEG also owns the Borsa Italiana, Millennium IT, and other financial brands.
The indexing division of the FTSE is similar to that of Standard & Poor’s; it specializes in creating index offerings that the global financial markets can use as benchmarks. An index is comprised of a hypothetical portfolio of stock holdings, so it can act as a representation of the performance of a particular market segment—also called a benchmark. Although the FTSE offers many indexes, its two most well-known indexes are the FTSE 100, which is comprised of the most highly capitalized blue-chip stocks listed on the London Stock Exchange, and the Russell 2000 Index, a small-cap stock market index of the smallest 2,000 stocks in the Russell 3000 Index.
- The Financial Times Stock Exchange (FTSE) Group is a financial organization that specializes in the management of asset exchanges and creating index offerings for the global financial markets.
- The London Stock Exchange (LSE) Group currently owns FTSE.
- In May 2015 FTSE Group combined with Russell to form the brand name, FTSE Russell.
- The FTSE 100 is generally the most well known FTSE index, but the FTSE Group manages hundreds of indexes.
Understanding the Financial Times Stock Exchange Group (FTSE)
The FTSE Russell Group, established in 2015 after the merger of FTSE and Russell Investments, is a U.K.-based global provider of benchmark financial indexes, market data, and analytics.
The FTSE's indexes are available across asset classes, styles, and strategies and are designed to meet the needs of a wide variety of clients, including buy-side, sell-side, custodians, asset owners, exchanges, investment consultants, and exchange traded fund (ETF) providers.
The FTSE 100 Index
The FTSE 100 is very widely used in Europe. At its creation, in January 1984, the index had a base level of 1,000. It has since reached highs of over 7,000. Many market analysts, traders, and investors look to the FTSE 100 as a proxy for the performance of the wider U.K. stock market, similar to the way that many U.S. investors look to the Dow Jones or the S&P 500 indexes.
The level of the FTSE 100 is calculated using the total market capitalization of the constituent companies and the index value. Total market capitalization changes alongside individual share prices of the indexed companies throughout the trading day, so the index value also changes. When the FTSE 100 is quoted up or down, it is measured against the previous day’s market close. It is calculated continuously on every trading day from 8:00 AM at the market opening until the 4:30 p.m. LSE close. A FTSE 100 decline means the value of the largest UK listed companies decreasing. The FTSE hitting a new high means the total worth of all the indexed companies increasing.
Readjustment of the index constituents, or the companies that make up the FTSE 100, happens every quarter, usually the Wednesday following the first Friday in March, June, September, and December. Any changes to the underlying index constituents and their weighting comes from the values of the companies taken at the close of business the night before the review.
As of January 2021, the top 5 FTSE 100 holdings by market cap were:
- ROYAL DUTCH SHELL
- HSBC HOLDINGS PLC
- (BP.L) BP PLC
The FTSE 100 is often considered a leading indicator of prosperity for the United Kingdom (UK) companies and the UK economy in general. As such it typically draws investors looking for exposure to big UK companies. While several of its listings do include companies with homes outside of the UK, it is most significantly made up of UK companies and impacted by UK daily developments.
Other FTSE Group Indexes
As mentioned, there are a prolific number of indexes attached to the FTSE Group and the FTSE Russell brand. The FTSE Group's most popular index in addition to the FTSE 100 is the FTSE 250, the FTSE 350, and the FTSE All-Share. All four of these indexes have index fund offerings in the Vanguard FTSE 100 (VUKE), Vanguard FTSE 250 (VMID), the iShares 350 UK Equity Index Fund, and the Vanguard FTSE UK All Share Index Unit Trust.
The year the FTSE 100 Index was launched in its current form.
Some of the other popular FTSE Russell indices include:
- FTSE Nasdaq 500
- FTSE AIM 100
- FTSE RAFI US 1000
- FTSE4Good Indices
- FTSE Dividend Growth
- Russell Top 200
- Russell 3000
- Russell 2000
- Russell 1000
- Russell Equal Weight Indices
- Russell Geographic Exposure Indices
Real World Example
As mentioned earlier, the FTSE 100 is a market-cap weighted index. Companies near the top of the market cap list often attract the most attention. As a historical example, consider the impact of British Petroleum (BP.L), one of the largest components by weight, on the index. According to The Irish Independent, BP which ranks fourth in market cap reported a strong fourth-quarter earnings report which helped to lift its stock price by nearly 1% while the value of the FTSE 100 climbed almost 2% on February 5, 2019.