The FTSE 250 Index, often referred to as the UK 250 by spread betting and CFD trading firms, is a stock market index which tracks the largest 250 companies listed on the London Stock Exchange, after those in the FTSE 100. While the FTSE 100 represents the biggest companies with shares traded in London, the 250 includes the group below the FTSE 100.
Many fund managers and investors feel the FTSE 250 is a better indicator of the performance of the UK market, because more of the companies included it in derive the bulk of their revenues from business done in the UK. The FTSE 100 (or UK 100) is composed of a much higher proportion of multi-nationals or large foreign firms that have chosen to list in London for capital raising purposes.
The FTSE 250 is a capitalisation-weighted index: this means that companies are included based on the size of their market capitalisation, the value of the shares they have out their in the market.
The FTSE 250 also contains a large number of investment trusts. These are investment vehicles which issue shares on the stock market. They are managed like mutual funds, but investors buy into them by acquiring shares. At the time of writing, J.P.Morgan alone had six of its investment trusts as constituents of the FTSE 350.
Like the FTSE 100, the FTSE 250 has several foreign firms or multinationals with substantial interests outside the UK. It also frequently trades very closely (correlates) with the FTSE 100. However, as an index, it is regarded as a better reflection of UK share prices than the FTSE 100.
The top 350 companies traded in London, namely the FTSE 100 and FTSE 250 combined, are represented by the FTSE 350 index.