What is the IBEX 35 and how does it work?

What is the IBEX 35 and how does it work?

February 26, 2021
1 month ago

In Spain, there are four stock exchanges: Madrid, Barcelona, ​​Bilbao, and Valencia. All of them are managed and administered by the company Bolsa y Mercados Españoles (BME), which selects a group of the 35 main securities listed on the Spanish stock market.

This group forms the IBEX 35 and are the 35 indices of Spanish companies, regardless of size and the sector, with the greatest liquidity, negotiation, and price that operate in the Spanish stock market (more precisely in the Spanish Stock Market Interconnection System (SIBE), the electronic platform where company shares are traded and exchanged). And each company has its own part in shaping this benchmark index.

These companies are not always the same, since the Technical Advisory Committee reviews the index four times a year, to make sure it reflects the behavior of the market as accurately as possible. Companies may enter or leave based on their liquidity. In today's index we find companies from many sectors: financial, construction, consumption, telecommunications, etc., with names such as Aena, Bankinter, BBVA, Caixabank, Grifols, Mapfre, Mediaset, Meliá Hotels, Naturgy, and more.

And so, the IBEX 35 is the main stock index of the Spanish Stock Exchange and reflects the price variations, where values ​​(companies) are weighted by market capitalization adjusted for free float (this refers to the total percentage of shares of a company that are frequently traded on the stock market).

To calculate the index in a day, the value obtained in the previous trading session is used as a basis and multiplied by a percentage obtained from the 35 companies' current capitalizations. This is divided by their capitalization in the previous session. They are adjusted in the event that any of the securities has carried out a financial transaction.

The IBEX35 also serves as a reference to establish the value of derivative financial products, such as futures, options, warrants - and for investment funds or pension plans. And the index also provides real-time information on the evolution of prices and the history of a session. Investors or agents, based on this information, can make their decisions.

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