ICEX has decided to change the method it uses for selecting companies into the ICEX-15 Index. On 10 March ICEX will announce the first ICEX-15 based on the new method and that composition will be in effect from April 1 2004 to June 30 2004. The principal changes from the current method are:
- a maximum spread requirement is introduced
- market capitalisation of companies is free-float adjusted
- in addition, ICEX-15 constituents are required to publish news concurrently in Icelandic and English
The purpose of these changes is to promote liquidity of equities. The new method is discussed in the 18th issue of ICEX News & Views and is described at http://news.icex.is/attachments/other/ hlutabrefavisitolur_ENSKA.pdf. but in essence the selection is performed as follows. First, 20 shares are selected based on on-exchange turnover during the preceding 12 months. This step is unchanged from the current method. These 20 companies are then ranked according to free-float adjusted market capitalisation. The free-float adjustment is a deviation from the current method. The 15 largest companies in terms of free-float adjusted market capitalisation are included in the index as long as they satisfy the requirement that the average end-of-day spread is no higher than 1.5%. If companies do not satisfy the spread condition, they may be replaced by companies among the 20 that rank lower in terms of free-float adjusted market value provided the latter satisfy the spread condition.
The first selection into ICEX-15 according to the new method will be based on trading data from 1 March 2003 to 29 February 2004 and on spread data from 1 August 2003 to 29 February 2004. The reference period for the spread is shorter to not make the spread condition retroactive. The first index composition determined by the new method will be in effect for only 3 months, i.e. from 1 April 2004 to June 30 2004. Thereafter, the index composition will be reviewed every 6 months as is currently the case.
