For domestic and international investors alike, the FTSE 100 is one of the most familiar global share indexes.
The FTSE 100 was launched on January 3, 1984 at an index level of 1000. From its start, the FTSE 100 introduced a revolutionary feature—minute by minute price updates—that allowed UK investors to experience the equity market’s changing fortunes almost instantaneously. (Earlier indexes were calculated only monthly or, at best, hourly).
With advances in technology and changes in stock market practice, the FTSE 100 was soon calculated every 15 seconds and is now calculated effectively in real time, with each price change in its constituents reflected instantaneously in the index’s value. New types of financial product, such as index-tracking exchange traded funds (ETFs), have evolved hand-in-hand with the shift to real-time index updates.
This continuous process of changing FTSE 100 index values has now gone on uninterrupted for over three decades during London Stock Exchange trading hours, with one exception. On Friday October 16, 1987 hurricane force winds caused such devastation around London that not enough market makers made it to work to quote share prices via the Stock Exchange’s SEAQ trading system.
Since its introduction, the FTSE 100 has also witnessed important changes in its methodology, most notably the adjustment of constituents’ index weightings by an investability (or “free float”) factor from 2001 onwards.
During a time of rapidly rising popularity of index-based investment products, free float adjustment helped avoid potential price distortions in index constituents with a limited proportion of their share capital available for public trading.
On March 20, 2015, the FTSE 100 crossed the psychologically important 7,000 threshold. The previous record was fifteen years old, with an index level of 6,930.2 recorded on 30 December 1999 during the “dot-com” share market boom.
The FTSE 100 since Inception
Source: FTSE, 31/12/1983-11/03/2015. Past performance is no guarantee of future returns.
Understandably, it’s such records, as well as the more mundane daily index movements, that form the basis of most share market news reports.
But over the 31 years since its launch, it’s arguably the subtle, less noticed changes that have helped the FTSE 100 to serve its primary purpose—holding a mirror to the evolving UK share market.
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