Key terms explained 

An index (in the context of equity markets) is a measure of the performance of a selected group of companies – usually those that trade on one or more stock markets. In the case of the S&P/ASX index series, the companies must be listed on ASX to be eligible for index entry. The rules - outlined in publicly available methodology documents - articulate criteria by which companies will be included in an index as well as when they will be removed. In the case of the S&P/ASX indices the rules are set out in the S&P/ASX Australian Indices Methodology. 

Some key concepts include: 

Rebalance - Indices are reviewed at regular intervals and “rebalanced’. The eligible company population is measured against the entry criteria, which can result in existing constituents falling out of the index, and in-turn new companies entering the index and changes in “weighting” (see below). 

Float-adjusted market capitalisation - Market capitalisation (“market cap”) is the number of shares multiplied by the share price. For the majority of S&P/ASX indices, the market cap used is an average of the daily market cap over a six-month period leading up to an index rebalancing reference date. This happens at different frequencies for different indices. For most S&P/ASX indices, the market cap is further refined by basing entry for the S&P/ASX 300 and above on float-adjusted market capitalisation (often referred to as “free-float” market cap). “Free float” is a concept used in financial markets to indicate the percentage of a company’s issued share capital available for trading, which will therefore feed into its liquidity. Share capital not considered available to trade includes, but is not limited to, that held by founders and management together with “strategic” holders such as venture capital or private equity funds. 

Relative liquidity - Liquidity in the context of share markets simply means how much of the stock turns over (is traded) on a regular basis (the normal measure is daily turnover in dollar value or number of securities). Relative liquidity measures how much trading has taken place in a company’s shares compared to the broader market. In the S&P index methodology, relative liquidity is the median liquidity of an individual stock over the market liquidity – the latter of which, in the case of S&P/ASX indices, references the All Ordinaries index (“All Ords”). Individual stock median liquidity is that stock’s median daily value traded on ASX over the prior six months, divided by the float-adjusted market cap over the prior six months. The market liquidity is market capitalisation-weighted average of the stock median liquidities for the companies in the All Ords (for the ASX/S&P 300 and above “free-float” market cap is used and below that it’s full market cap). 

Weighting - The majority of S&P/ASX indices are weighted by market capitalisation. This means the percentage of each stock in the total index corresponds to the market capitalisation of that stock in relation to the others (free float adjusted or total market cap depending on which approach the index uses). There are also some equal-weight indices in the series1. 

Buffer - To minimise “churn” (companies coming in and out of the index), there are buffers to both the entry and exit of major indices. For the S&P/ASX 300, a company must beat the bottom 25 index participants (and all the other eligible companies) to join, by ranking 274 or higher, and will not be removed until it ranks 326 or lower. For the S&P/ASX 200, it’s a twenty-position buffer with entry being at 179 or higher and removal at 221 or lower. 

Key S&P/ASX indices 

The highest profile S&P/ASX indices are the All Ords (the largest 500 companies on ASX by market capitalisation); the S&P/ASX 200 (the largest and most liquid 200 companies on ASX); and the S&P/ASX 300 (the largest and most liquid 300 companies on ASX). In addition to these, there are many subsets of the S&P/ASX 300 and S&P/ASX 200 covering sectors and size segments and many thematic indices. For example, there are franking credit-adjusted indices, dividend-oriented indices, Environment Social and Governance (ESG) indices and indices covering industries such as resources or specific metals/minerals, property, healthcare, technology, and many more. 

Most indices are public, but there are also “custom” indices developed by S&P specifically for certain clients (usually institutional investors). Altogether, excluding custom indices, there are over 1,000 S&P/ASX indices. Each index has a three-letter code for ease of reference.  

All Ordinaries (XAO) 

The All Ords (XAO) is the simplest of the indices because the only criteria to obtain entry, apart from listing on ASX, is market capitalisation. The index measures the largest 500 companies by six-month average total (as opposed to float-adjusted) market capitalisation. The XAO was rebalanced once a year in March but from 2025 it will be rebalanced twice a year in March and September. It is often seen as a proxy for the ASX “market” even though the ASX has around 2,000 listed companies. Often you will see news services referring to the All Ords being up or down by certain percentage points which is a reference to the state of the market. The liquidity of the XAO is also used as the basis for setting the liquidity requirements for entry into the S&P/ASX 200 and S&P/ASX 300. 

S&P/ASX 200 (XJO) 

The XJO is often referred to as the “benchmark” index for the Australian market. This is because many managed funds benchmark their performance against this index’s return. It also has some very large and liquid ETFs issued over it. The XJO is rebalanced quarterly (March, June, September and December). 

S&P/ASX 300 (XKO) 

The XKO broadens the “benchmark” to include small and medium-sized companies by adding the next 100 largest and most liquid companies. The XKO is rebalanced semi-annually in March and September. 

Benefits of indices 

For investors, indices provide a range of benefits including: 

• measurement of the performance of a selected group of companies within a market; 
• a benchmark of performance for fund managers; a basis for a range of investment products which provide easy, cheap, diversified investment into a group of companies (in the case of the XJO and XKO, the largest and most liquid companies on the ASX market); 
• identification of a group of companies that have desirable investment qualities such as sufficient size and liquidity to allow easy entry to and exit from the stock. 

For companies, indices broaden the range of investors interested in or with a mandate to invest in the company, raise profile and add liquidity due to index trades. For example, 70% of the share capital in the XKO is institutional vs 30% retail. Furthermore, 45% of the share capital is held by overseas institutions. 

1 Indicative values based on smallest entrant for inclusion prior to December 2024, and March 2025 for the S&P/ASX series. S&P/ASX indices use S&P’s data as at the index calculation reference date. ‘Company size’ is total market cap for comparability. S&P/ASX indices use float-adjusted market cap to determine entry (refer definition above) – these figures are given below.

2 MUFG. Estimates based on investor holdings data, May 2024.

The S&P/ASX indices offer the additional benefit of a relatively early entry point compared to global comparators. Many global indices use total market cap for entry criteria but, as explained above, many key S&P/ASX indices use “float-adjusted” market cap.  Whilst subject to market movements and historical in nature, the smallest entrant into the S&P/ASX 300 in the March 2025 rebalance (at the index calculation reference date in February) was AUD800m (AUD513m float-adjusted market cap). For the S&P/ASX 200, this was around AUD1.6b total market cap (AUD1b float-adjusted market cap). Using the full market cap figures, this compares to around AUD8.6b for the FTSE 100; AUD16.7b for the Hang Seng, AUD32.5b for the S&P 500 and AUD76.2b for the NASDAQ100.  

As capital market dynamics evolve, ASX and S&P Dow Jones Indices collaborate on index development to create new indices or modify existing indices to benefit the market. Recent examples of new indices include the S&P/ASX All Technology Index (XTX) and the S&P/ASX Agribusiness Index (XAG) – both sector indices helping identify investible companies in these specific sectors. In early 2025 a consultation proposal was approved to increase the rebalance frequency of the XAO to semi-annual to improve its currency.  

Indices capture the performance of a broad range of asset classes, investable markets and specific segments. They are often referenced in financial markets - being used as benchmarks and linked to investment products. The S&P/ASX series of indices is tailored to meet the ever-evolving needs of investors and companies on ASX’s market.