From March 2013 onwards, all FTSE’s float-weighted indices will use actual free float percentages to calculate their weightings. This will reflect the actual stock available in the market more accurately and reduce turnover caused when a security moves from one free float band to another as the result of corporate actions or other structural change.
FTSE was the first index provider to introduce free float to its equity indices in 2000. Recently, in June 2012, it introduced its first actual free float weightings for the FTSE UK Index Series. From March 2013 this approach will extend to all float-weighted FTSE Indices (including the FTSE Global Equity Index Series and custom indices). The free float for each constituent will move to actual float (rounded up to the nearest 1%) unless the actual float is within a 3% buffer of its current banded float, when it will remain at its existing float weighting.
These changes to the free float banding system are being implemented after FTSE carried out a market-wide consultation which showed that participants were strongly in favour of this move.
To minimise aggregate turnover resulting from this change to actual free float, the scheduled index review timetables have been changed – many reviews originally scheduled to take place between September 2012 and June 2013 will now take place in March.
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