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The London Stock Exchange is well known for its index, the ‘footsie’. But what is the FTSE index, what does FTSE stand for, and does it have anything to do with feet?
What is the FTSE 100 stock index?
The FTSE 100 is a benchmark index that roughly points to the performance of the London Stock Exchange (LSE), as well as investor sentiment in the UK markets. It’s often referred to as the FTSE, or ‘footsie’.
To be included on the FTSE 100 index, companies must meet several criteria. Most importantly, they must be listed on the LSE, and meet a minimum market cap. This minimum market cap can vary, but it is typically around £4 billion (which was roughly US$5.08 billion in February 2025).
What does the FTSE 100 stand for?
Let’s tackle the foot question first. No, the FTSE index has nothing to do with feet, swanky socks, or wandering feet under a dinner table. It’s simply the shorthand way of saying ‘footsie’, which removes the effort of saying ‘ef-tee-ess-ee’ every time it’s mentioned.
‘FTSE’ stands for the Financial Times Stock Exchange 100. It’s an abbreviation of letters from the two companies that launched the index in January 1984: the Financial Times and the London Stock Exchange. The FTSE replaced its predecessor, the FT 30, which was operated by the Financial Times. The ‘100’ is the number of companies with stocks on the index.
What’s the main difference between the FTSE 100 and S&P 500?
In many ways, the FTSE 100 is comparable to US share markets’ benchmark index, the S&P 500. The S&P 500 is regarded by the financial sector as a measure of American consumer spending and the performance of the US economy. However, because many of the companies included in the FTSE 100 are global, it isn’t a strong indicator of just British consumer spending.
For example, if you’ve ever used Dove soap, tucked into a tub of Ben & Jerry’s after a breakup, pleaded with your mum for a Magnum, or got your whites whiter with Persil, you’ve used a Unilever product. Unilever is a global brand familiar to many Kiwis, and is part of the FTSE 100. Unilever is also available on the US share markets as an American depository receipt (ADR): UL - ADR.
How is the FTSE 100 index weighted?
The companies or constituents on the FTSE 100 are considered to be blue chip companies (well-established companies that pay consistent dividends). They are weighted by their market cap. This weighting means the index always contains the 100 highest value companies listed on the London Stock Exchange (LSE). We show you below what these weightings look like across 11 industry sectors.
Like many exchanges, including the Nasdaq and the NZX, London Stock Exchange Group LSEG is also listed on its own exchange, under the ticker: LSEG.L.
When does the FTSE 100 change, and why?
Just like the changing of our four seasons, the FTSE 100 is rebalanced every quarter. If companies drop below the market cap value of the top 100, they are replaced by companies that have reached the benchmark.
What the FTSE 100 contains
While the companies on the FTSE 100 have their headquarters in the UK, many of them are global businesses, such as AstraZeneca, British American Tobacco, BP, and Rentokil. While companies with global operations can benefit by reaching more customers, they could also be exposed to geopolitical instability, as well as regional and global economic factors (both positive and negative). This is called geographical revenue exposure.
Example: Tesco's epic fail
A spectacular example of geographic revenue exposure was when UK supermarket giant Tesco’s launched into the US. In November 2007, the retailer opened the first of their 199 Fresh & Easy stores on America’s West Coast — the operation costing around US$1.5 billion.
But timing is everything…
Earlier in 2007, some Americans began defaulting on their subprime mortgage loans (risky high interest rate loans given to people with low credit scores). This became known as the ‘subprime meltdown’, which was a contributing factor to the global financial crisis. This then hiked US unemployment, and meant Tesco’s ‘aspirational grocery stores’ became unaffordable for everyday Americans.
But despite two decades of research (estimated to cost around US$500 million), and creating a product they thought could be competitive in the US market, Tesco failed to take off, leaving the US in 2013. Of the multiple failures, one was placing stores on the wrong side of the road — left-hand drive made it hard to pop in on the drive home after work. But ultimately, Tesco couldn’t have anticipated being exposed to the risk of the unfolding GFC, resulting in their very costly failure to launch. And this was their undoing, no thanks to geographic revenue exposure.
The FTSE 100 index list — sector breakdown
The FTSE 100 contains a range of industry sectors. In the UK, the most dominant sectors on the FTSE 100 are Financials, Consumer Staples and Industrials, which, combined, account for just over half the FTSE 100 (51.3%) company weightings. The top five sectors combined, account for nearly two-thirds weighting in the index (74.8&).
Looking at the size of companies by market cap that were on the FTSE 100 at the end of 2024
- Mean £20,155 million (more than US$25,000M)
- Median £7,529 million (more than US$9.3M ). The
- Largest by market cap was £156,780 million (just over US$197.5M )
- Smallest £1,145 million (just over US$1.4M).
The top 10 FTSE 100 constituents by market cap*
- AstraZeneca (AZN.L)
- Shell (SHEL.L)
- HSBC (HSBA.L)
- Unilever (ULVR.L)
- Rio Tinto (RIO.L)
- RELX (REL.L)
- BP (BP.L)
- British American Tobacco (BATS.L)
- London Stock Exchange Group (LSEG.L)
- GlaxoSmithKline GSK (GSK.L)
Although they’re large, the market caps of the largest companies listed on the LSE do not compare in dollar value to the giants that dominate the US share markets — which includes eight companies valued above US$1 trillion. For example, in January 2025, the combined market caps of the top 10 LSE constituents — equalled around US$1.22 trillion, which at the time was the equivalent value of less than Mag 7 stock, Tesla (TSLA) and more than investing GOAT Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B).
Investing in the FTSE 100
There are five exchange traded funds (ETFs) on the LSE that track the performance of the FTSE 100 (note: currently there are no FTSE 100 ETFs available on Hatch). Four are passive funds that replicate the performance of the index, so are likely to have lower fees. Just one is active, which may incur higher fees for the active management of the fund by the fund manager.
The EFTs are:
- Amundi FTSE 100 UCITS ETF (L100.L) — passive
- BlackRock’s iShares Core FTSE 100 UCITS ETF (ISF.L) — passive
- Deutsche Bank XTrackers FTSE 100 Short Daily Swap (XUKS.L) — passive
- Legal & General FTSE 100 UCITS ETF Super Short Strategy (SUK2.L) — active
- Vanguard FTSE 100 UCITS ETF (VUKE.L) — passive
Read more: ETF vs stocks: What’s the difference?
The FTSE 100 share price for these ETFs moves up and down depending on the combined market movements of all the company stocks on it. This means that because of the market cap weighting, the highest value companies on the index have more influence on the index’s up or down fluctuations.
Example: in January 2024, Shell (SHEL.L) posted positive earnings and announced a US$3.5 billion share buyback (which is usually a confidence signal from a company that their share price is undervalued). Their stock price rose 2.6% following the news, and as the second highest weighted stock on the index at the time (and still today), Shell was a contributor (along with other sectors) to the FTSE 100 reaching a record high, lifting 3.62%.
Do the FTSE 100 ETFs pay dividends?
Yes, FTSE 100 index funds do pay dividends to their shareholders. The dividends are paid by the individual companies that make up the index. The FTSE 100 dividend yield (dividend paid for each share, divided by the current stock price) in January 2025 was 3.52%. You can find out more about UK dividend yields here.
So, for example, AstraZeneca's dividend yield was 2.11% (January 2025), while in the same month, Shell’s dividend yield was 4.19%, and Rio Tinto’s was -7.18%. When all 100 companies’ dividend yields are combined — like those of AstraZeneca, Shell and Rio Tinto — the average equates to 3.52% (the dividend yield of the FTSE 100).
ETFs pay out dividends quarterly, semi-annually, or annually, and the iShares Core FTSE 100 UCITS ETF and the Vanguard FTSE 100 UCITS ETF are known for regularly paying their shareholders dividends.
What is the FTSE 250?
The FTSE 250 is a stock market index that consists of the 250 mid-cap companies listed on the LSE. Mid-cap means they have a market cap (total dollar value) lower than the top 100 companies on the FTSE 100, but they are still considered high-performing public companies. The FTSE 250 is seen as a stronger indicator of the British economy than the FTSE 100 because it includes more companies that operate within the UK.
What companies are on the FTSE 250?
The FTSE 250 constituents include both British and global brands many Kiwis will be familiar with. This includes luxury fashion house Burberry (BRBY.L) (once modelled by a 10-year-old Romeo Beckham), Scottish investment bank, Abrdn (ABDN.L), British baked goods company, Greggs (GRG.L), UK-founded food delivery company, Deliveroo (ROO.L), 70-year-old TV channel (creators of iconic shows Emmerdale, Britain’s Got Talent, Love Island, Mr Bean, and Coronation Street), ITV (ITV.L), and stationery and book retailer, WH Smith (SMWH).
The FTSE 250 index list — sector breakdown
In January 2025, the market cap weightings of the 11 sectors in the FTSE 250 were approximately as follows:
Pros and cons of FTSE 100 vs FTSE 250
FTSE 100 vs FTSE 250 historical average return
According to UK-based financial services company IG, in the 20 years from 2003 to 2023, the average annualised return of the FTSE 100, including dividends, was 6.3%. This is the total return, including dividends, called total shareholder returns (TSR) (around half the annual return of the FTSE 100 is paid as dividends). Meanwhile, the FTSE 250 has outperformed the FTSE 100, with an average annual return of around 9.5% over the same period.
Historically, the FTSE 250 has outperformed the FTSE 100 over the long term, because of the potential growth of mid-cap companies. But it may have come with higher volatility, particularly in the short term.
Which index is right for you?
Any decision to invest in the FTSE 100 or FTSE 250 depends on your investment goals, risk tolerance, and time horizon. If you want stability and reliable dividends, the FTSE 100 may be more suitable. But if you’re looking for higher growth potential, are OK with more volatility and are investing for the long term, the FTSE 250 could better suit your goals.
Investing in either index offers unique opportunities, and a balanced portfolio may include investing in both to benefit from the strengths of each.
Are companies leaving the London Stock Exchange?
In January 2024, Bloomberg reported that the number of LSE-listed companies had shrunk by 25% since 2014. And last year, 88 companies delisted from the LSE, with only 18 joining it. UK and European companies have indicated a few reasons for leaving the UK stock exchange. This has included mergers and acquisitions and private equity takeovers (meaning they are no longer public companies), while others have been enticed by the US share markets, or a few may have been put off by Brexit.
UK and European companies choosing US listings
Many UK and EU companies have chosen to move their listings to as ADRs (American depository receipts) on the US share markets. Among them last year was construction rental company Ashtead (AHT.L), which — after being on the exchange for four decades — announced plans to move to a US share market with the support of shareholders. Also in 2024, UK company Flutter Entertainment (FLUT) temporarily dual-listed on both the LSE and the NYSE, before leaving the LSE entirely and being only listed in the US.
The US share markets are the largest in the world (while the LSE is the 9th largest, according to Statista), which means by being US-listed on either the NYSE or the Nasdaq, companies can access more potential investors. Some analysts have suggested that UK-headquartered companies, such as Ashtead and Flutter, may have sought prestige that can come with listing on US markets, as well as hoping for higher liquidity and higher company valuations.
Companies that previously may have chosen to list on the LSE, instead listed on US share markets through initial public offerings (IPO) in 2024. This included British semiconductor company Arm (ARM), Finland’s Amer Sports (AS), UK blockchain tech company Argo Blockchain (ARBK), and Kazakhstan-based fintech Kaspi.kz AO (KSPI).
Also in 2024 fintech companies Klarna (founded in Sweden) and the UK’s Revolut filed papers with the SEC (in the US) proposing to go public via an IPO in the US in 2025.
Did Brexit put companies off the LSE?
Some commentators think Brexit isn’t a strong driver for why companies left (or didn’t list on) the LSE. They reckon private companies today have a range of options to access equity, and it’s possibly the listing requirements (on any exchange) that could be a barrier to becoming a public company:
‘There are long-term trends at work here where Brexit has little or no influence, including how cheap debt has been relative to equity for companies for more than a decade, the rigours and regulation and reporting requirements of listed firms and the rise and rise of private equity, itself a beneficiary of cheap debt, which allows firms to find funding away from public arenas.’ — Russ Mould, investment director at AJ Bell, Trustnet, 2025
But yes, Brexit has curbed the enthusiasm of some companies to be listed on the LSE. In particular, TikTok fave, Ryanair (RYAAY - ADR) — which is listed on the Nasdaq as an ADR, as well as on Euronext Dublin and the LSE as a tradeable equity (not a company stock) explicitly left The London Stock Exchange as ‘an inevitable consequence of Brexit’, according to Ryanair CEO Michael O'Leary’s interview with Bloomberg TV.
The history of the London Stock Exchange
The London Stock Exchange (LSE) has a storied history that dates back over three centuries.
1698
The origins of the LSE can be traced to Jonathan's Coffee House, where broker John Castaing began publishing a list of stock and commodity prices. This marked the beginning of organized trading in London.
1801
The formal establishment of the London Stock Exchange occurred on December 30, 1801. This event marked the transition from informal trading in coffee houses to a regulated exchange.
1840
While people were reading first edition Oliver Twist, the telegraph revolutionised trading on the exchange by enabling prices to be transmitted almost instantly. This innovation significantly improved the efficiency of the market.
1914
During World War I, the LSE played a crucial role in liquidating British overseas securities to finance the war effort. This period highlighted the exchange's importance to the national economy.
1986
The ‘Big Bang’ deregulation transformed the LSE by introducing electronic trading and ending the traditional open outcry system. This led to a significant increase in trading volume and efficiency.
1995
The launch of the Alternative Investment Market (AIM) provided smaller companies with access to capital, further diversifying the types of businesses listed on the exchange.
2007
The LSE merged with Borsa Italiana, creating the London Stock Exchange Group (LSEG). This merger expanded the exchange's reach and influence in the global financial markets.
2020s
Despite challenges like Brexit, and some British and European companies being lured to other share markets, such as the world’s two largest markets, the NYSE and Nasdaq, the London Stock Exchange is still one of the world's prominent and stable stock exchanges.
When you understand the FTSE 100 and FTSE 250, it can help you make informed decisions and confidently navigate the characteristics of the London Stock Exchange. And you’ll know the difference between frisky feet under the table and the UK’s two most prominent indexes.
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.
