What Is the Financial Times Stock Exchange Group (FTSE)?

What Is the Financial Times Stock Exchange Group (FTSE)?

Let me explain the FTSE to you directly. The FTSE, which you pronounce as 'footsie,' stands for the FTSE Russell Group, previously called the Financial Times Stock Exchange Group. People often just say 'the FTSE' when they mean the FTSE 100, the primary index that follows stock prices on the London Stock Exchange.

The London Stock Exchange Group (LSEG) owns the FTSE Russell Group, and this group handles the creation and management of indexes tracking global stocks, including that FTSE 100. Think of their indexing work as similar to what Standard & Poor’s does in the US—they produce indexes that act as benchmarks for the financial markets worldwide. Remember, an index is essentially a hypothetical portfolio of stocks representing a market segment's performance.

Key Takeaways

Here's what you need to know upfront. The London Stock Exchange Group owns the FTSE Russell Group, which oversees various stock indexes. The FTSE 100 stands out as the most recognized, monitoring movements on the London Stock Exchange. Top components include AstraZeneca, Shell, and HSBC Holdings.

Understanding the Financial Times Stock Exchange Group (FTSE)

I want you to grasp how the FTSE operates. It provides numerous indexes, but the stars are the FTSE 100, made up of the highest-capitalized blue-chip stocks on the London Stock Exchange, and the Russell 2000, which covers the smallest 2,000 stocks in the Russell 3000 Index.

The FTSE Russell Group came about in 2015 from the merger of FTSE and Russell Investments, positioning it as a UK-based provider of benchmark indexes, market data, and analytics on a global scale. Beyond these, the FTSE maintains many other indexes that benchmark different asset classes and investment strategies.

The FTSE 100 Index

Focus on the FTSE 100, as it's widely used across Europe. It started in January 1984 with a base of 1,000 and has climbed above 7,000 at times. Analysts, traders, and investors like you often view it as a stand-in for the broader UK stock market, much like the Dow Jones or S&P 500 in the US.

The index level comes from the total market capitalization of its companies, adjusted by the index value. This total cap shifts with individual share prices during trading hours, and daily quotes compare to the previous close. It's calculated nonstop from 8:00 a.m. to 4:30 p.m. on trading days at the LSE. A drop in the FTSE 100 signals a decrease in value for the largest UK-listed firms, while a new high indicates an overall increase.

We readjust the index constituents quarterly, on the Wednesday after the first Friday in March, June, September, and December, based on company values from the prior night's close. As of June 22, 2024, the top five by market cap were AstraZeneca, Shell, HSBC Holdings, BHP Group Ltd, and Unilever.

You should see the FTSE 100 as a key indicator of prosperity for UK companies and the economy. It attracts investors seeking exposure to major UK firms, though it includes some international listings and remains heavily influenced by UK developments.

Other FTSE Group Indices

The FTSE Group and FTSE Russell brand cover a vast array of indexes. Besides the FTSE 100, popular ones include the FTSE 250, FTSE 350, and FTSE All-Share.

Investing in the FTSE

You can't invest directly in an index, but you can put money into funds that track or even short the FTSE indexes. Many options are exchange-traded funds (ETFs), such as the Vanguard FTSE 100, Vanguard FTSE 250, iShares 350 UK Equity Index Fund, iShares Core FTSE 100, and Vanguard FTSE UK All Share Index Unit Trust.

What Is the U.S. Version of the FTSE?

The FTSE 100 tracks the top 100 UK companies by market cap, and when media say London stocks are up or down, they mean this index. In the US, equivalents are the S&P 500 for the top 500 companies or the Dow Jones Industrial Average for 30 key firms.

Can Americans Invest in the FTSE?

Yes, Americans can invest easily through ETFs tracking FTSE indexes, like the Vanguard FTSE 100, Vanguard FTSE 250, iShares 350 UK Equity Index Fund, and iShares Core FTSE 100.

What Is the Difference Between a Stock Market and a Stock Exchange?

A stock exchange is a company running a marketplace for buying and selling stocks, such as the New York Stock Exchange or Nasdaq. The term 'stock market' broadly covers all stocks traded in a country or region.

The Bottom Line

To wrap this up, the Financial Times Stock Exchange, now the FTSE Russell Group, offers indices tracking UK financial market segments. The FTSE 100, its flagship, follows the top 100 UK companies by market cap, akin to the US S&P 500. If you're outside the UK, you can invest via mutual funds or ETFs that mirror these indices.