The new methodology means that shares trading in the General Index whose weight exceeds 25% will be weighted at 25% of the index, while those in the Main Market Index whose weight exceeds 30% will be weighted at 30%.
“After the reconstruction of the banking sector in Cyprus, Bank of Cyprus would have been the constituent that dominated a whole index. The cap will stop this from happening,” said Michael Michalis, an official in the CSE trading department.
The FTSE CySE20 index already uses capped free-float methodology. Its constituents whose weights are greater than 25% are capped at 25% using prices adjusted for corporate actions as at the close of business one week prior to the last business day in May and November.
The weights of all lower ranking constituents are increased correspondingly. The weights of lower ranking constituents are then checked and if they exceed 25% they are also capped at 25%. This process is repeated until no constituent weight exceeds 25%.
The CSE General Index will have five constituents after the inclusion of Bank of Cyprus, and the CSE Main Market 14 constituents.