The S&P/TSX Composite Index is the headline index for the Canadian equity market based on data from the Toronto Stock Exchange (TSX). The index measures the performance of representative stocks from 10 Canadian business sectors, including consumer discretionary, consumer staples, energy, financials, healthcare, industrials, information technology, materials, telecommunication services and utilities.
Since its introduction, the S&P/TSX has contained between 200 and 300 of the top Canadian stocks, but the number of stocks in the index can vary. The ticker symbol for the index is SPTSX, and the index lists more than 1,500 companies representing a total market capitalisation of more than US$2 trillion.
The Toronto exchange is the largest in Canada in terms of market capitalisation, the third largest in North America, and the eighth largest in the world.
TSX Composite Chart
Stock trading in Canada dates to 1852, with the creation of the Toronto Stock Exchange. At its beginning, only 18 stocks were traded on the exchange. In 1977, the exchange implemented its Computer Assisted Trading System (CATS), and in the same year the TSE300 Toronto Stocks index was created. At that time, the index included stocks from the top 300 companies in Canada across 14 sectors, and it was introduced at a base level of 1,000 points.
In 2002, the Toronto Stock Exchange launched its own corporate shares in a public offering, and the TSE300 was replaced by the S&P/TSX Composite Index, under management by Standard & Poor's Indices division of McGraw Hill Financial publishers. Under the new management, the index covered 10 sectors and the number of stocks covered became variable. In its starting year, the S&P/TSX included 223 stocks among more than 1,500 listed on the Toronto Stock Exchange. As of 2016, it included 235 stocks.
The S&P/TSX index is maintained by the S&P/TSX Canadian Index Committee, which has discretion to alter rules, policies and the index composition methodology. The committee is comprised of three members representing the Toronto Stock Exchange and four members representing S&P Dow Jones Indices. The committee is chaired by a member designated by S&P Dow Jones Indices and its meetings are held monthly.
According to Standard and Poor's Indices, changes to S&P/TSX are generally only made as part of a quarterly review. The index committee, however, may choose to review and add a security to any of the indices in between quarterly review periods.
Listing Eligibility Criteria
To be eligible for inclusion in the S&P/TSX Composite, a security must meet the following criteria:
- It must represent a minimum weight of 0.05% of the index, after including the Quoted Market Value (QMV) of that security in the total float capitalisation of the index based on the volume-weighted average price (VWAP) over the final three trading days of the month-end before the quarterly review.
- The security must also have a minimum VWAP of CA$1 over the previous three months and over the last three trading days of the month-end prior to the quarterly review.
- Additionally, the security must also have a liquidity of 0.50 as measured by float turnover, which is the total number of shares traded at Canadian trading venues in the previous 12 months divided by float-adjusted shares outstanding at the end of the period.
- Further, the company must be incorporated, formed or established in Canada, with the Toronto Stock Exchange as the primary stock exchange for listing. Some types of securities, including those representing mutual fund corporations, preferred shares, exchangeable shares, warrants, installment receipts and others deemed inappropriate by the index committee are ineligible for inclusion in the index.
The top stocks on the S&P/TSX Composite Index according to market capitalisation are:
- Royal Bank of Canada (RY)
- Toronto-Dominion Bank (TD)
- Bank of Nova Scotia (BNS)
- Canadian National Railway (CNR)
- Suncor Energy Inc. (SU)
- Bank of Montreal (BMO)
- BCE Inc. (BCE)
- General Motors Company (GMM.U)
- Enbridge Inc. (ENB)
- Brookfield Asset Management, Inc. (BAM.A).
In the decade through 2016, the S&P/TSX Composite Index has shown an average return of 4% annually. Its worst performance was a 33% decline in 2008, while its best performance was a 35% gain in 2009. Its highest level since inception was 15626 points, which was reached in August 2014.
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Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…