We often think of a stock market index as a select group of large and famous companies.
But an index does not start with a pre-selected list of well-known names; it usually starts with a broad universe of listed securities and applies a transparent set of rules to narrow it down to the final list of constituents.
For the FTSE All-World Index, that means first deciding which countries, exchanges, market segments, companies and security types are eligible for consideration. In the index construction process, we then assign companies to a nationality, group multiple equity lines where relevant and rank companies by full market capitalisation within regional universes.
In the next stage, we ask whether a security is usable in a real portfolio. Some securities may be excluded because they are sanctioned, subject to exchange surveillance, affected by trading restrictions or otherwise difficult for investors to hold or trade. Others may fail governance or access tests, such as minimum voting rights in developed markets, minimum free float, foreign ownership limits or foreign headroom, which is the percentage of shares available to foreign investors as a proportion of the company’s foreign ownership limit.
We test a company’s liquidity separately because a stock can be legally eligible and have a sizeable capitalisation but still be too difficult to trade efficiently. Each of these checks removes a different kind of risk from the index construction process.
Finally, we ask whether the company and the investable part of its shares in issue are large enough to represent the intended market segment. We use full market capitalisation to determine where a company sits in the large-, mid-, small- or micro-cap structure. We then adjust for investable market capitalisation, so-called “free float”, to ensure we include in our indices only the portion of shares that investors can realistically access.
In the chart below, we show how we apply these steps to build the FTSE All-World Index, which includes large- and mid-cap stocks from global equity markets.
Starting with a universe of nearly 35,000 securities from all eligible countries and segments, we apply these filters to arrive at 4,270 securities in the FTSE All-World Index, as at March 2026.
The cascading eligibility criteria make FTSE Russell’s role as the index provider visible: we narrow a broad universe into a final index that is rules-based, transparent and practical to track.
Forming the FTSE All-World
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