FTSE to review free-float requirements

Nov 02, 2011
<p>Consultation comes as UK investors and the media raise concerns over the required standards for a premium listing and inclusion in the FTSE 100</p>

FTSE Group, the index provider, has launched a consultation on minimum free-float requirements following debate over whether London’s listing standards are too lax.

The firm is asking market participants if the minimum threshold for UK incorporated companies to join the FTSE UK index series, which includes the FTSE 100, should be raised from 15 percent to 25 percent.

This change would bring the FTSE’s criteria in line with the UK Listing Authority’s 25 percent minimum free-float requirement for a ‘premium listing’ in the UK.

The requirement for overseas-based companies to be included in the FTSE’s UK indices will remain at 50 percent, says the group in a release.

If the FTSE’s free float requirements do go up, companies will be ‘grandfathered’ to allow them to meet the 25 percent threshold over time, adds the index provider.

The results of the consultation will be made public in December. Visit this website to take part in the consultation.

The review comes in the wake of debate about the requirements for gaining a premium listing in the UK and entrance into the FTSE 100 index.

Concerns raised

Concerns were raised after Eurasian Natural Resources Corp, which was granted a premium listing in 2007 despite floating only 18 percent of its shares, ousted two directors in what has been called a ‘governance fiasco’ earlier this year.

ENRC was granted a waiver to the normal UKLA listing requirements at a time when London was keen to add big international names to its market.

The UKLA is allowed to grant exceptions to its 25 percent minimum requirement when the size of the company means even a small free float will allow for a large number of shares to be traded.   

Worries among investors and the media have intensified following the news that three Russian resources companies – Polyus, Polymetal and Evraz – plan to seek entry into the FTSE 100 index.

In a letter to the Financial Times in October, Karen Litvack, head of governance and sustainable investment at F&C Investments, said ‘the news that Polyus Gold is seeking a waiver of the 25 per cent free-float minimum raises fresh concerns about the rigor of the listing process – particularly given that a premium listing serves as a passport to inclusion in the FTSE 100 index and a large range of UK passive funds.’

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