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Finextra50 methodology

29 October 2007  |  15984 views  |  0 Source: Finextra50 Financial Graph on screen

The Finextra50 Financial Technology Index is a free-float value weighted index of the world's leading companies that provide technology-based products and services to the financial services industry. It was set at an indexed value of 100 at market close on Friday 4th May 2007. Our monthly update on the index's movements will provide a framework for analysing trends in the financial technology market, particularly vendor consolidation - a trend that shows no sign of slowing down.

Methodology

To ensure that index movements are tied closely to technology demand in the financial services industry, we decided to limit inclusion in the index to publicly-listed technology product and services companies that earn at least 40% of their revenue from the financial services industry. This information was gathered from company annual reports and Finextra estimates.

By this criteria, we mean to focus on organisations whose customers are predominantly: insurance companies; commercial or public banks operating in retail and/or wholesale business; and capital markets participants and infrastructure providers. We have not included payment processing companies that deal mainly with retail payments directly for merchants and retailers. And we have also chosen to exclude organisations such as market operators, agency and interdealer brokers, ECNs, banks and custodians. For while these do provide technology-related services to the industry, we wanted the index to focus on pure technology vendors (software and hardware) and service providers.

From our list of investible companies we have calculated free-float market capitalisation (taking closely held shares out of the equation) and use this to prioritise index entry. We have also enforced several other criteria to ensure the index is global, provides good coverage across the financial services industry, and is not too heavily weighted towards one or two large companies. These include:

  • All companies have been categorised into one of three regions: North America, Europe and Asia Pacific. No one region can have more than 25 companies in the index, nor less than 5.
  • No single company shall make up more than 20% of the weighted index.
  • The 5 top companies can make up no more than 50% of the weighted index.
  • Market cap weights will be modified if necessary to reduce single stock concentration.

Index constituents

The 50 publicly traded companies that comprise the index are currently:

  • 3i Infotech
  • ACI Worldwide
  • Actuate
  • Advent Software
  • Bravura Solutions
  • Broadridge Financial Solutions
  • Cognizant
  • Computershare
  • Diebold
  • DST Systems
  • EXLService Holdings
  • Factset Research Systems
  • Fair Isaac
  • Ffastfill
  • Fidelity National Information Services
  • Fidessa
  • Financial Technologies (India)
  • Fiserv
  • Fundtech
  • GlobeOp
  • Gresham
  • Interactive Data
  • Iress Market Technology
  • Jack Henry
  • Linedata Services
  • Longtop Financial Technologies
  • LPS
  • Metavante
  • Microgen
  • Misys
  • Morningstar
  • Mphasis
  • Nucleus Software
  • Online Resources
  • Oracle Financial Services Solutions
  • Orc Software
  • Patsystems
  • Pegasystems
  • Polaris
  • S1
  • SEI Investments
  • SimCorp
  • Syntel
  • Temenos Group
  • The Innovation Group
  • Thomson Reuters
  • Total System Services
  • Vasco Data Security
  • Wincor Nixdorf
  • Yucheng Technologies

Companies leaving and entering the index will be announced in the weekly report of index movements, and the above list will be updated accordingly.

Adjustments

Movements in the index will be calculated and reported monthly on Finextra.com - usually on Monday mornings after the last Friday in each month. To standardise shares traded in different currencies, we use US$ as the base currency and convert using mid-market rates each Friday at noon US Eastern Time, as reported on www.xe.com. Currently, the index comprises companies listed in the US, UK, France, Germany, Denmark, Sweden, India and Australia.

The index was first benchmarked based on market closing prices on Friday 4 May 2007 and set at 100. To maintain the index in the face of corporate actions, we use a divisor adjustment method. Adjustments due to companies leaving the index through acquisition will be made close to actual transaction date. Other corporate actions such as share issuance or repurchase, or rights offerings will usually only be incorporated in a divisor adjustment on a six-monthly basis unless the action is deemed to have a significant structural impact.

For more information on the Finextra50 Financial Technology Index email contact@finextra.com or visit the Finextra50 community on our community channel

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