The NASDAQ-100, shorthand symbol ^NDX, is a capitalization weighted index that includes 103 securities. These securities are issued from 100 non-financial companies that are NASDAQ listed. The index is not US based; rather, it is exchange based with certain caps on the influence of its largest components. Weights are based generally on market cap.
The ^NDX is distinguished from the Dow Jones Industrial Average (DJIA) because of the international scope of the NASDAQ. Both the DJIA and the S&P 500 contain financial companies, which the ^NDX does not.
Important Facts About the NASDAQ 100
The ^NDX began on January 31, 1985 in the hopes of separating itself from the New York Stock Exchange. Options on the index first began trading on the Chicago Board Options Exchange (CBOE) in 1994. January 1998 saw the ^NDX expand to include international listings.
In the year 2000, NASDAQ enjoyed the most actively traded security in the US – The PowerShares QQQ ETF.
Standards for Inclusion on the NASDAQ 100
Companies must stand against a number of difficult standards in order to be included in the NASDAQ-100. These standards include, but may not be limited to, the following criteria:
• The company’s security must be exclusively listed in either the Global Market or Global Select NASDAQ tiers.
• The company’s security must be offered publicly on a known American platform for at least 90 days.
• Trading for the security must have an average daily volume of at least 200K shares.
• The company must remain in compliance with its annual and quarterly reporting.
• The company cannot be in the midst of declaring bankruptcy.
Before 2014, NASDAQ only offered one class of stock to each company, regardless of the number of classes the company sold. Companies that have more than one class of stock are also allowed to have more than one class within the index. However, all of those classes must meet the criteria for inclusion.
Balancing the NASDAQ
The ^NDX remains a trusted index because of its tradition of annual rebalancing. Every year, NASDAQ reviews all of its components and negotiates re-ranking companies based on the new market capitalizations. NASDAQ uses two major tools to determine annual market values: 1. company share prices on the final October trading day, and 2. share totals on the final November trading day.
If a company remains in the top 100 according to these metrics after the annual audit, then it remains in the index. If a company is ranked from 101st to 125th in the annual audit, it retains its position only if it was within the top 100 in the previous year.
The ^NDX drops a company if that company does not have at least 0.1% index weighting. A company that falls below this metric may be dropped at any time.
Is the NASDAQ-100 the Same as the NASDAQ Composite Index?
The ^NDX is often confused with the NASDAQ Composite. The Composite Index contains every stock within the NASDAQ. If you see an index quoted in popular investment culture, you are probably seeing the NASDAQ Composite.
Aside from the number of companies in the index, the ^NDX also differs from the Composite in other ways. The most important difference is the difference in how companies are weighted. The ^NDX is a form of capitalization weighted index, which increases the opportunity for diversity within the index.
Asset Trading on the ^NDX
The ^NDX is a grouping of the best assets on the NASDAQ. If you are looking for CFD trading options with TradeFW, the ^NDX is one of your best online trading options. The ^NDX is good for not only CFDs, but also more traditional ways of trading. Securities come to you vetted for quality and longevity. However, make sure that you consult with a trusted advisor before you commit to any investment