Tehran Stock Exchange To Launch Free Floated Adjusted Index (TEFIX)

Tuesday, 8 September 2009

The following text is an excerpt of an interview with Mr. Ali Sanginian, TSE’s deputy CEO. Since the main proportion of shares of listed companies are held by strategic shareholders who are unlikely to be willing to trade, weighting the index with the total outstanding shares to compute the index number, decreases the efficiency and accuracy of price, as index and big firms with low free float shares can distort it. For this reason, most of exchanges have started to launch free floated adjusted index since 2000. Free-float adjustment methodology increases the efficiency and accuracy of index and provides an accurate view of market movements. This method also eliminates the double calculations that come out due to cross ownership. The free float of a company is the proportion of shares that are held by investors who are likely to be willing to trade.