ISE adopts new indices calculation

The Irish Stock Exchange is to introduce a "free float" methodology for the calculation of the various ISEQ equity indices.

The move keeps the ISE in line with best international practice for its benchmark suite of indices.

Other indices that use free float methodology include the FTSE-100, the German DAX, the French CAC-40, the Eurostoxx 50 and the S&P Euro.

Irish Stock Exchange director of Trading and Regulation Brian Healy said two types of shareholding will now be excluded when calculating the ISEQ indices.

"Shares held by interested parties and long-term shareholdings that make up a significant portion of the issued share capital which are unavailable in the market will be excluded."

He added that one of the Exchange’s newer indices, the ISEQ20-index has been free float-based since its launch in March 2005.

"Apart from bringing us in line with best international practice, free float indices will ensure that investors are not put at a disadvantage when trying to match the weighting of a stock where a significant portion of a company’s shares are not freely available for trading in the market,” said Mr Healy.

Free float will also encourage investment in the constituent companies of the ISEQ indices as some investors or investment strategies are now restricted to free float indices.

The introduction of free float indices is also consistent with the European Commission’s Markets in Financial Instruments Directive which from next November will require that shares are identified not only by their trading turnover but also by their free float market capitalisation.