The FT-SE 100 Index was launched in January 1984 as the first real- time index in the UK that was a suitable base for derivative contracts. It is recalculated every minute from 8.00 to 16.30 (London time).

The Index is constructed from 100 of the largest UK companies and is a capitalization weighted index. This means that a change of 5% in the highest capitalized stock would have a greater effect on the Index than a 5% move in a lower capitalized constituent. The 100 companies that comprise the index account for approx. 65% of the capitalization of the UK Equity Market.

The Index is administered by the FT-SE Actuaries UK Indices Committee, comprising representatives from the London Stock Exchange, Financial Times and LIFFE as well as the main users of the Index and members of the actuarial profession. The Committee meets quarterly to review the constituents according to a robust set of publicly available ground rules.

The LIFFE FT-SE 100 Index future and option contracts

FT-SE 1 00 Index futures and options were first traded in the UK in May 1984 and since then there has been strong growth in trading volumes. By the end of 1993, the futures contract was trading an average of 11,500 contracts per day and the contracts held open represented, on an equivalent value basis, some 5 billion of the 100 underlying stocks.

LIFFE has two options contracts on the FT-SE 100 Index. The American-style option, which started trading at the same time as the future, can be exercised on any business day. The European-style option, introduced in February 1990, can be exercised only on the last trading day of the expiring month. Volume. for the two Index options was averaging over 12,000 contracts a day by the end of 1993.