The NASDAQ-100 Index monitors the performance of top 100 U.S. and international companies listed on the NASDAQ stock market. The index includes large companies across various industry groups, such as software, hardware, retail, biotechnology and telecommunications. There is an exception made for financial and investment companies that are excluded from this list.
Developed in 1985, the NASDAQ-100 works using a modified capitalisation-weighted method. This way it preserves the attributes of capitalisation weighting but is enhanced by diversification. The NASDAQ reviews the index composition on a quarterly basis, adjusting the stocks' weightings with the help of the proprietary algorithm.
To become eligible for the NASDAQ-100 and to be initially included into this index, the securities must comply with the following basic criteria:
- The issuer should not represent a financial company
- The issuer must not be involved in bankruptcy proceedings
- The daily security's trade volume must comprise 200,000 shares minimum, which is calculated annually under the Ranking Review
- The issuer's first-time listing in the USA should relate only to the NASDAQ Global Market
- The issuer should refrain from any agreements that could potentially affect the eligibility of the security for the NASDAQ-100 index
- In case the security is subject to a jurisdiction outside the U.S., it must be recognised on the American markets
- The security's issuer should not have any financial statements with an audit option that has been withdrawn
- The security must be seasoned (meaning listed minimum for three months) on the NASDAQ, NYSE or NYSE AMEX.
Though the criteria mentioned above are more than strict, there is some space for concession. However, these exceptions can be made exclusively according to the extenuating reasons that are carefully evaluated for validity.