What is Nasdaq-100 index?
Nasdaq-100 index is nothing but an index of 100 largest non-financial companies listed on the NASDAQ market. The index comprises of companies of US as well as foreign countries. Industries from various sectors form part of the index. The industries include technology, healthcare, telecommunications, media, retail, and biotechnology. The Nasdaq-100 is made up of the 107 equity securities which are issued by the 100 largest non-financial firms listed on Nasdaq. The Nasdaq-100 was launched in January 1985.
As per Nasdaq-100 index definition, Nasdaq-100 is a modified capitalization-weighted index. The weight of stocks in the index is based on the market capitalization. There are certain rules which cap the authority of leading companies. No financial companies are involved with the index. Hence, Nasdaq-100 is different from Dow Jones Industrial Average and S & P 500.
The Nasdaq-100 was begun in 1985 by NASDAQ. The original intention was to promote the index under the influence of New York Stock Exchange. The NASDAQ Financial -100 comprises of financial companies. Companies dealing with insurance, banking, brokerage, and mortgage are including the in Financial-100 index. The intention of the NASDAQ was to promote the creation of options and futures and the index can be taken as a benchmark for mutual funds as well.
The index maintains the best price of 250 initially. It reached 800 during December 1993. The annual adjustments were made for the first time in 1993. Foreign companies were included in the index for the first time in 1998. If you would like to invest in stock market, you can go through the Nasdaq-100 index. The Nasdaq-100 index is abbreviated as NDX in derivative markets. Its futures contracts are traded on Chicago Mercantile Exchange. ND and NQ are the heavily traded futures on the exchange.
The Nasdaq-100 standards are revised on regular basis. Companies should fulfill the stringent criteria to be included in the NDX. The companies should be listed in Global select of market tiers to be eligible for inclusion in NDX. The company should have a public offer for at least 3 months in the US market. The average daily volume of shares should be at least 200,000 shares. The companies should publish current quarterly and annual reports and no bankruptcy proceedings might have been launched against the company.
The rebalancing and re-ranking of the NDX will take place on regular basis. The composition of Nasdaq-100 will change with delisting. The NASDAQ can delist a company for failing to fulfill its obligations. If the business lists in another exchange or merger of a company will also lead to delisting.
The share prices of the last trading day in October and publicly announced share totals (as of last trading day of November) are the two tools used by NASDAQ. These tools are used to calculate the market value of these companies. If companies remain in the top 100 position after the annual review, they will be retained. In case the current rank is in between 101 and 125, they will be retained if they are listed in last year. If they are not listed in the last year Nasdaq-100, those companies will be dropped.