Introduction
The FTSE 100 is a market-capitalisation-weighted index of the 100 largest companies listed on the London Stock Exchange by full market value, maintained by FTSE Russell, a subsidiary of London Stock Exchange Group. Its composition changes quarterly through a formal review process tied to precise ranking thresholds. As of mid-2025, the index covers companies across 19 sectors, with a combined market capitalisation exceeding £2 trillion.
What the FTSE 100 Contains
The index is heavily weighted toward global multinationals rather than purely domestic UK businesses. The top ten constituents typically account for around 40% of the total index weight. As of the most recent review, the largest holdings include Shell (SHEL.L), AstraZeneca (AZN.L), HSBC (HSBA.L), Unilever (ULVR.L), and BP (BP.L). Financials, energy, consumer staples, and basic materials collectively represent the majority of index weight, while technology — dominant in the S&P 500 — remains structurally underrepresented, accounting for roughly 1–2% of the FTSE 100 versus over 30% in its American counterpart.
Revenue exposure is the critical detail most investors overlook. Approximately 75–80% of FTSE 100 aggregate revenues are generated outside the United Kingdom. This makes the index a proxy for global earnings in sterling terms, not a pure measure of UK economic health. When sterling weakens, FTSE 100 earnings translated back from dollars or euros rise mechanically, inflating the index even as UK domestic conditions deteriorate.
The Rebalancing Mechanism
FTSE Russell conducts constituent reviews quarterly, in March, June, September, and December, with the changes taking effect after the close of trading on the third Friday of each review month. The rule is straightforward: any company ranked 90th or above by full market capitalisation is automatically promoted to the FTSE 100 if not already a member, while any current member ranked 111th or below is relegated to the FTSE 250. Companies ranked 91st through 110th remain in their current index, creating a buffer zone that prevents excessive churn.
Full market capitalisation is used for ranking, but the index itself is weighted by free-float adjusted market cap — the proportion of shares available to ordinary investors, excluding locked-in strategic holdings. This matters under MiFID II disclosure frameworks, as many UCITS funds and ETFs tracking the index are required to publish their exact constituent weights and rebalancing methodology transparently to retail clients across the EEA.
European Context
From a European institutional perspective, the FTSE 100 sits outside the eurozone but remains tightly integrated with European capital markets through cross-listed stocks, euro-denominated revenues, and significant European shareholder bases. Post-Brexit, UK-listed equities lost automatic equivalence status under EU market infrastructure rules, meaning European brokers executing FTSE 100 trades face additional best-execution documentation requirements under MiFID II Article 27. ESMA has continued to flag the fragmentation this creates in European equity liquidity.
For European ETF investors, most FTSE 100-tracking products domiciled in Ireland or Luxembourg — such as the iShares Core FTSE 100 UCITS ETF (ISF.L) — carry sterling currency risk unless explicitly hedged, a distinction ESMA's product governance guidelines under MiFID II require to be disclosed clearly in KIDs.
Historical Episodes
In June 2018, Shire Pharmaceuticals was removed from the FTSE 100 after its acquisition by Japan's Takeda triggered a change in its primary listing structure. The event highlighted how merger activity can abruptly alter index composition regardless of quarterly review cycles, with tracker funds forced to sell at potentially disadvantageous prices.
During the March 2020 COVID-19 shock, several companies including Rolls-Royce (RR.L) saw market caps collapse sharply enough to trigger relegation in the June 2020 review. The FTSE 100 fell approximately 34% peak to trough between February and March 2020, forcing the largest index rebalancing in years as sector weights shifted dramatically toward defensives.
In September 2023, building materials group CRH (CRH.L) departed the index following its primary listing transfer to the New York Stock Exchange, a move driven by higher US valuation multiples. CRH had been a top-20 constituent, and its exit was widely cited as evidence of London's structural challenge in retaining large-cap listings.
What to Watch
Track FTSE Russell's quarterly ranking data, published roughly six weeks before each review date, to anticipate probable promotions or relegations before they are confirmed. Monitor sterling/dollar exchange rates closely, since a sustained GBP appreciation mechanically compresses the index's reported earnings in sterling terms. Watch for primary listing transfers to US exchanges, which have accelerated since 2022 and represent a structural drain on FTSE 100 market cap. Assess free-float percentages of any new entrant, as a low free-float weight reduces actual index impact despite a high gross market cap ranking. Note AstraZeneca's outsized influence — at times representing over 10% of index weight, it can single-handedly move the headline number on results days.