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What is the S&P/TSX Composite Index
The S&P/TSX composite index is the Canadian equivalent to the S&P 500 market index in the United States. The S&P/TSX composite index represents about 70% of the total market capitalization on the Toronto Stock Exchange (TSX).
BREAKING DOWN S&P/TSX Composite Index
The S&P/TSX composite index is calculated by Standard and Poor's, and contains both common stock and income trust units. It contains 250 of the 1500 companies on the exchange.
S&P/TSX Composite Index Eligibility
According to the S&P Dow Jones Indices website, stocks must meet certain market cap, liquidity and domicile eligibility requirements, in order to be added to the S&P/TSX Composite Index.
There are two market cap eligibility requirements:
1) the weighted average price the security traded at over the last 10 trading days of the quarter (which is when they make additions to the index), must be equal to at least .05% of the index.
2) the security has to trade at at least C$ 1 over the past three months, and over the last 10 trading days of the quarter.
There is only one liquidity requirement:
1) measuring liquidity as the total number of shares traded in Canada and the US over the last calendar year, divided by the float-adjusted shares outstanding at the end of that calendar year, the security's liquidity must be 0.5.
There are a number of domicile requirements:
1) the company must be incorporated, formed, or established in Canada,
2) the company must file financial statements and other continuous disclosure documents with the appropriate provincial securities regulator,
3) the company's primary stock exchange listing is on the Toronto Stock Exchange (TSX),
4) the company must have a "substantial presence" in Canada, either through offices or fixed assets and revenues.
S&P/TSX vs S&P 500
The Toronto Stock Exchange is dominated by a lot of commodity stocks, most notably crude oil, due to the concentration of natural resources in Canada. Thus, the S&P/TSX Composite Index is more correlated to the fluctuation in commodity prices than its counterparts in the U.S.