SP ASX 200

The S&P/ASX 200 stands as a key stock market index in Australia, tracking the progress of the 200 biggest companies listed on the Australian Securities Exchange (ASX) based on their market value. Established in 2000, it acts as a standard for the Australian stock market and is frequently utilized by investors to assess the condition and direction of the Australian economy. Under the management of S&P Dow Jones Indices, the S&P/ASX 200 accounts for roughly 80% of the total market value of the Australian stock market, making it an essential measure for investors, analysts, and policymakers.

Features of S&P/ASX 200 

Following are the features of S&P ASX 200 Index:

• Broad Market Representation: The index encompasses the top 200 stocks traded on the ASX, offering a detailed overview of the Australian stock market.
• Market Capitalization-Weighted: The index is balanced based on the market value of shares available for trading, making sure that bigger companies play a bigger role in influencing the index's results.
• International Recognition: The S&P/ASX 200, acknowledged on a global scale, serves as a tool for investors across the globe to access opportunities in Australian stocks.
• Liquidity Standards: Index components must satisfy certain liquidity standards to guarantee that the index stays tradable and pertinent.
• Sector Variety: The index covers a broad spectrum of sectors, providing a varied perspective on the Australian economy.

Eligibility Criteria

Following are the eligibility criteria for the inclusion in the S&P ASX 200 futures:

• Market Capitalisation: A stock's weight within the index is determined by its float-adjusted market capitalisation. This value is derived from the current index shares, the latest stock price, and the Investable Weight Factor (IWF). The IWF reflects the float-adjusted portion of a stock's equity, meaning any strategic holdings such as corporate, private, or government stakes reduce the IWF and consequently lower the float-adjusted market cap. 
• Liquidity: The stock must have a trading volume in terms of dollar value and number of transactions that exceeds at least 0.025% of the total trading volume of all eligible securities. To prevent any single company from dominating trading, they are capped at a maximum of 15% for value, volume, and transactions.
• Listing: Only stocks listed on the Australian Stock Exchange are eligible for inclusion in any of the S&P/ASX indices.

Calculation Process of S&P ASX 200 

Following is the calculation process of S&P ASX 200:

• The stocks are selected based on their market capitalization. Only the 200 largest companies listed on the ASX by market cap are included.
• Investments need to fulfill certain liquidity standards, which involve a certain share of total trading activity.
• The value of a stock's market capitalization is modified based on its IWF, which stands for the float-adjusted part of the stock's equity. This IWF does not include strategic investments (for example, shares owned by company founders, directors, trusts, venture capitalists, and other long-term investors).
• The formula of Index Level is: Index Level=Index Divisor∑(Float-Adjusted Market Cap of each stock)​
• The index tier is calculated by adding together the float-adjusted values of each share's market capitalization and then dividing that total by a divisor. This divisor serves as a stabilization tool to ensure the index's value remains consistent across different periods.
• The index is reviewed quarterly to ensure it continues to represent the 200 largest and most liquid stocks on the ASX.