How often are indices updated for recent IPOs? (FTSE...)

Lokolo

Virgin Money have gone through their IPO and are now available for trading. However, at what point are the FTSE indices rebalanced and new companies added if they are large enough?

It seems quite a simple and easy question, but I cannot find the answer anywhere.

bowlhead99

Lokolo wrote: »

Virgin Money have gone through their IPO and are now available for trading. However, at what point are the FTSE indices rebalanced and new companies added if they are large enough?

It seems quite a simple and easy question, but I cannot find the answer anywhere.

It's a quarterly process; for the FTSE100 for example, for stability you only get automatic entry if you're in the top 90 and you only fall out if you are below 110th (obviously they keep the total number fixed at 100 so someone new meeting one of those criteria, or someone breaking up or going private will cause a reshuffle). To add a further complication the index is adjusted for free float, so if you only listed 10% of the company and 90% was held by insiders, might appear in a different spot on the list. There are a few other qualification factors.

http://www.ftse.com/products/downloads/How_does_UK_review_work.pdf

http://www.ftse.com/products/downloads/FTSE_UK_Index_Series.pdf

http://www.ftse.com/products/downloads/FTSE_100_Constituent_history.pdf



I think based on headline prices Virgin is about 200th overall so would not get in the top 100 but would get in the next 250. To answer the next obvious question, some trackers will buy it in advance of the next reshuffle day, presuming it will get in, others will leave it to nearer the time. Fun and games like that will contribute to tracking error against the 'true' declared index.

Lokolo

That's exactly what I wanted to know TYVM.