BET-10 index definition
The BET-10 index tracks the performance of the most liquid companies listed on the Bucharest Stock Exchange.
What is the BET-10 index?
BET-10 or Bucharest Exchange Trading Index 10, represents the first index developed by the Bucharest Stock Exchange (BVB). The index was established in 1997 and is structured as a free-float, capitalisation-weighted price index. The weight of the constituents in the index is capped at a maximum of 20 per cent.
The index is a price index and is calculated in three currencies, RON (Romanian Leu), EUR and USD. The starting value of the index was 1,000 points. The 52-week range of the index in October 2019 was from 6,771 to 9,659 RON (approximately €1,420 to €2,030).
The primary requirement for inclusion or removal of stocks from the index is based on liquidity. In addition, the index can be used as a reference for derivative instruments (options, futures, etc.) and structured products.
BET-10 index explained
The BET-10 index is defined as an index with a variable number of stocks. Initially, 10 stocks were included; today, the number of stocks in the BET-10 index can be between 10 and 20. A review of the index composition is performed in March and September. The primary criterion for inclusion is the stock liquidity level. The calculation of the liquidity is defined in accordance with the liquidity coefficient.
The adjustments of the BET-10 index, for the purpose of adjusting the weights of stocks included in the index, are performed on a quarterly basis.
Companies included in the index can come from different sectors, such as banks, utilities, telecoms, energy, closed-end funds, etc. In order for companies to be included in the index, their weights should be at least 0.5 per cent of the index capitalisation. Accordingly, constituents should maintain a minimum weight of 0.2 per cent of the index capitalisation.
The adjustment of the market capitalisation of each stock in the index is conducted with the free-float factor and the representation factor. The free-float market capitalisation is calculated as follows:
Free-float market capitalisation of a stock = price x number of shares outstanding x free-float factor x representation factors x price correction factor.
The free-float factor for a stock denotes the number of stocks available for trading on the market; the representation factor is used to limit the weight of a stock in the index.