Footsie

Demystifying the Footsie: Understanding the FTSE 100 Index

The term "Footsie" colloquially refers to the Financial Times-Stock Exchange 100 Share Index (FTSE 100), a vital gauge of the London Stock Exchange's (LSE) performance.

Understanding the Footsie

The FTSE 100 tracks the 100 largest public companies listed on the LSE by market capitalization, representing over 80% of the exchange's total market capitalization. Initially a collaboration between the Financial Times and the LSE, the FTSE is now managed by the London Stock Exchange Group. Analogous to the Dow Jones Industrial Average and S&P 500 in the United States, the FTSE 100 serves as a significant benchmark for the broader market.

Calculating the Footsie

The FTSE 100's level is determined by the aggregate market capitalization of its constituent companies and the corresponding index value. This index value fluctuates throughout the trading day in response to changes in individual share prices. The FTSE 100's performance is measured against the previous day's closing market value and is continuously calculated during trading hours, from 8:00 AM to 4:30 PM LSE time. A rise in the FTSE 100 indicates an increase in the collective worth of the UK's largest listed companies, whereas a decline signifies a decrease.

Composition of the FTSE

Established in 1984, the FTSE 100 has undergone revisions to accommodate mergers, acquisitions, and the inclusion or removal of companies, reflecting market dynamics. While inclusion in the FTSE 100 does not mandate British origin, listed companies must trade on the LSE. Currency fluctuations, particularly the strength of the pound, also influence the index. The FTSE conducts quarterly reviews to ensure representation of the highest market capitalization entities. Additionally, the FTSE manages other indices like the FTSE 250 and FTSE SmallCap, constituting the broader FTSE All-Share index.