FTSE 100 goes by the full name “Financial Times Stock Exchange 100 Index” sometimes shortened to FTSE or pronounced “Footsie”. The index came into be in 1984, as a joint venture between the London Stock Exchange and the Financial Times. The acronym FTSE originates from when the Financial Times and London stock exchange owned the index 50/50, hence the FT and SE that make up the name FTSE.
The FTSE Group, which is a subsidiary of the London Stock Exchange is tasked with the responsibility of maintaining the index. The London Stock exchange runs other indexes in addition to the FTSE 100, such as FTSE 250 and FTSE 350 all of which paint a unique picture of the overall stock market.
The FTSE 100 lists the top 100 companies by market cap, listed on the London Stock Exchange. The index seeks to provide a quick snapshot of the U.K stock market given its components which account for a huge percentage of the Kingdom’s total equity market value. For this reason, if the index is up, it means most people in the broader market are buying shares, and when it is down, it means people are dumping shares.
Why is the FTSE 100 important to traders?
The Financial Times Stock Exchange 100 Index, otherwise known as the FTSE 100 Index, is a share index of the 100 companies listed on the London Stock Exchange that have the highest market capitalisation. The FTSE 100 is often referred to as the “Footsie” and is seen as a gauge of the health of the UK economy. The FTSE 100 represents roughly 81% of the value of the UK market on the London Stock Exchange. It is the most widely used UK stock market indicator.
FTSE 100 trading hours
The main trading hours for the FTSE 100 are between 08:00 and 17:00 (GMT).
How to trade the FTSE 100 CFD?
The FTSE 100 is one of the most popular and widely traded indices available on the market, providing volatility and liquidity. Like any stock index, the FTSE cannot be bought and sold like an equity. Instead, you can trade the FTSE 100 index today using contracts for difference (CFD). Trading the FTSE using CFDs allows you to take a long or short position without having to deal with an exchange.
How is the FTSE 100 calculated?
The FTSE 100 is comprised of 100 of the UK’s top companies by market capitalisation. The index is analysed and composed by the FTSE Group, a subsidiary of the London Stock Exchange.
Constituents of the FTSE 100 are decided on a quarterly basis – usually March, June, September and December. During this process, the companies’ market capitalisation is determined and it is decided whether or not the companies will be included in the index. As the fortunes of companies rise and fall within the FTSE 100, some companies will leave the index allowing others to join.
There are some requirements, aside from large market capitalisation to being considered. These include:
Having a full listing on the LSE
Meeting the standards for nationality and company liquidity
Ensuring a ‘free-float’ level of 20% (shares that are held by the general public)
Once the list of FTSE companies is set for the next quarter, the values of each company are then updated on the index every 15 seconds during trading hours.
History of the FTSE 100
Launched in January 1984 as a joint venture of the London Stock Exchange (LSE) and the Financial Times, the FTSE 100 is one of the oldest UK indices. In August 1997, the FTSE crossed the 5000-point barrier, and then peaked on 20 December 1999, during the dotcom bubble, at 6930.2; a record that held its place for the next 15 years. This was substantially driven by massive gains in telecommunications, media and technology companies. But the dotcom bubble began to unravel in the early 2000s, and by spring 2003, the FTSE 100 was back below 4000 points. On 22 May 2018, the FTSE 100 hit an all-time high of 7903.5 points, and closed that day at 7877.45.
Factors That Affects FTSE 100 Performance
Some of the factors that affect FTSE 100 performance on a daily basis include:
U.K Earnings Session
The FTSE 100 is known to move up and down on huge volume during earnings sessions. The index tends to move higher on earnings report of the listed companies turning out positive. The reverse is also true. Over the years, the index has proved to be vulnerable more so to earnings reports of top banks in the U.K, as they provide a clear insight as to how the overall economy is doing.
The European Union being the United Kingdom biggest trading partner has also proved to have a significant impact on the performance of the Index. Adverse economic situations in the trading block most of the time triggers a sense of fear in the market which affects the performance of most stocks consequently leading to FTSE underperformance.
Economic Releases tend to have an impact on various companies most of which are listed in the index, conversely affecting the FTSE 100 direction of trade. Some of the reports include interest rate hike decisions, Manufacturing data as well as UK GDP Data.