FTSE (pronounced Footsie) Group is an independent organisation jointly owned by the Financial Times and the London Stock Exchange. The group creates and manages indices of shares, the most famous of which in the UK is the FTSE 100. This index comprises the 100 largest companies whose shares are listed on the London Stock Exchange. The index began in 1984 with a base level of 1000 and it rises and falls according to the share price performance of the 100 companies within it. The highest value ever reached by the FTSE 100 was 6950.6 in December 1999.
The components of the index are assessed every three months. If a company’s shares have under-performed, it may fall out of the index to be replaced by another company, whose shares have performed relatively better. Generally, two or three companies drop out of the FTSE 100 every quarter.
There are other FTSE indices besides the FTSE 100. The most widely known are the FTSE 250 – comprising the 250 largest companies listed on the London Stock Exchange after the FTSE 100 – and the FTSE All-Share, which includes virtually all the companies listed on the Exchange.
In the UK, the FTSE 100 is frequently used by large investors, stock brokers, financial experts and the media as a guide to stockmarket performance. The index is updated continuously throughout the working day and a closing price is calculated at 16.30 each trading day. It is possible to buy funds that invest in all the companies within a particular index. These are known as index funds.
There are similar indices performing similar roles across the world. In the US, for example, the best-known indices are the Dow Jones and the S&P 500. In Japan, the Nikkei is the most popular reference point.