One of the most frequent questions we get at Standard & Poor’s is, “What are the criteria for being added to an S&P Index?” First and foremost, S&P Indices are not rules-based; all changes are fully discretionary and are determined by the Index Committee based upon public information. Companies may not apply for inclusion. The Standard & Poor’s Index Committee examines five main criteria when looking for Index candidates: trading analysis, liquidity, ownership, fundamental analysis, market capitalization, and sector representation. Explaining these five items may give investors a better understanding of the Index management process | STANDARD PQORS Setting the Standard General Criteria for S P . Index Membership By Roger J. Bos CFA Senior Index Analyst Standard Poor s Roger_Bos@ Michele Ruotolo Domestic Index Manager Standard Poor s Michele_Ruotolo@ September 2000 2000 The McGraw-Hill Companies Inc. All rights reserved. Reproduction of this report is prohibited without the express permission of Standard Poor s. This report is published by Standard Poor s Quantitative Services 55 Water Street New York 10041. The information and data in this report has been obtained from sources deemed to be reliable but the accuracy of this information is not guaranteed. This report is based on publicly available information. Data represent past performance past performance is not a guarantee of future results. GENERAL CRITERIA FOR S P . INDEX MEMBERSHIP INTRODUCTION One of the most frequent questions we get at Standard Poor s is What are the criteria for being added to an S P Index First and foremost S P Indices are not rules-based all changes are fully discretionary and are determined by the Index Committee based upon public information. Companies may not apply for inclusion. The Standard Poor s Index Committee examines five main criteria when looking for Index candidates trading analysis liquidity ownership fundamental analysis market capitalization and sector representation. Explaining these five items may give investors a better understanding of the Index management process. UNIVERSE Before we begin discussing the criteria we should first outline the overall universe from which Standard Poor s picks Index candidates. Selection begins with Standard Poor s Stock Guide Database of over 10 000 companies. Screened out of the universe are stocks headquartered in foreign countries American Depository Receipts ADRs American Depository Shares ADSs real estate investment trusts REITs 1 closed-end funds equity derivatives and tracking stocks2. Initial public offerings
