Editor’s note: This is general educational information about how a stock index selects its constituents. It is not investment advice and does not describe any particular company. It is based on the published index ground rules and exchange rulebook listed at the end.
Analysis: what the rules protect against, and what they cannot
Read as a whole, the ground rules are built around turnover control rather than around picking the best companies. The 20th and 41st thresholds, the 15 percentage point gap between them, the separate 0.10% and 0.08% liquidity tests for entrants and incumbents, and the fixed data cut four weeks before implementation all exist to stop passive money being churned by short term price movement. That is a cost decision as much as an index design decision, since every change forces tracking funds to trade.
The design has a consequence worth holding on to. Index membership is a lagging indicator by construction. A company that has risen sharply may sit outside the index for months because the ranking was taken on a Monday four weeks before the effective date, and a company that has fallen stays in until it drops past 41st. The reserve list makes replacement mechanical rather than discretionary, so a corporate event that removes a constituent between review dates has a predetermined successor.
The rules also show where index eligibility and listing eligibility part company. A company can satisfy every SGX Mainboard requirement, including the public float rules in the listing manual, and still be ineligible for the index because its free float is at or below 15%, because too small a share of its voting rights sits with unrestricted holders, or because it traded too thinly in 10 of the last 12 months. Anyone trying to anticipate a review would work from the same inputs the rules use: full market capitalisation before investability weighting, the ranking positions on either side of the 20 and 41 boundaries, the monthly liquidity record, and the published reserve list.
What the documents say
The Straits Times Index is a rule, not a judgment. Its ground rules, version 3.9 dated May 2026, say the STI comprises the largest 30 companies by full market capitalisation that meet stated eligibility criteria, and then spend most of their length defining what eligibility, largest and the moment of measurement actually mean. The decisions that move a stock in or out are made against fixed rank thresholds on a fixed data cut, months of trading before the announcement lands.
Who is even in the pool
A security must be listed on the SGX Mainboard to be eligible. All classes of ordinary shares in issue and depository receipts qualify in principle, subject to the free float, voting rights and liquidity screens. Companies whose business is holding equity and other investments, classified under the Industry Classification Benchmark subsector Closed End Investments, and non-equity investment instruments in the subsector Open End and Miscellaneous Investment Vehicles, are not eligible. Convertible preference shares and loan stocks are excluded until converted.
Two structural screens follow. Companies with a free float of 15% or below are excluded outright. Companies assigned a developed market nationality must have greater than 5% of their voting rights, aggregated across all equity securities including those not listed or traded, in the hands of unrestricted shareholders. The rules work an example on that second test: a company with 100m listed class A shares carrying one vote each at a 65% float, plus 300m unlisted class B shares carrying 10 votes each, has 2.097% of its voting rights in public hands and is ineligible.
The liquidity test runs on a year of data
Liquidity is tested semi-annually in March and September, using the monthly median of daily trading volume. The March test runs from the first business day of March in the previous year to the cut-off date in February, and the September test from the first business day of September in the previous year to the cut-off in August. Each day’s volume is expressed as a percentage of shares in issue adjusted for free float at the cut-off date, and the median is taken from the ranked daily values, with zero trade days included in the ranking, so a security that fails to trade on more than half the days in a month records a zero median for that month. A month with fewer than five trading days is dropped from the test, and suspension periods are excluded.
The thresholds differ for joining and for staying. To be eligible for inclusion, a security must turn over at least 0.10% of its shares in issue, after investability weightings, based on its median daily trading volume per month, in 10 of the 12 months before the review. An existing constituent must trade at least 0.08% on the same basis in at least eight of the twelve months. A security excluded for failing the liquidity test stays out until the next semi-annual review. FTSE Russell may lower the percentage in exceptional market conditions to avoid removing a large number of constituents, may not apply that discretion to individual securities, and must announce its intention at least two weeks before the quarterly review.
The rank thresholds, and the day the data is taken
The STI is reviewed semi-annually in March and September, with a further quarterly review in June and December to account for new issues too small to qualify as fast entrants and to re-rank against the FTSE ST All-Share Index. Every review runs on data from the close of business on the Monday 4 weeks before the effective date, and changes are implemented after the close on the third Friday of the review month, taking effect the following Monday. At review, all STI constituents must be existing or pending constituents of the FTSE ST All-Share Index, so the STI review is conducted before the All-Share changes are implemented.
The insertion and deletion tests are asymmetric on purpose. A company is inserted if it rises to 20th position or above when eligible securities are ranked by full market capitalisation before any investability weighting. A constituent is deleted if it falls to 41st position or below on the same ranking. Between 21st and 40th, nothing happens, which is the buffer that keeps companies from crossing in and out on small price moves.
Because the index holds a constant number of constituents, the two lists have to be reconciled. Where more companies qualify for insertion than for deletion, the lowest ranking existing constituents are deleted to match. Where more qualify for deletion than for insertion, the highest ranking non-constituents are inserted to match. FTSE Russell publishes the five highest ranking non-constituents as a reserve list at each periodic review, and if a constituent is deleted after the changes are announced but before they are implemented, the highest ranking company on the new reserve list, excluding current constituents, takes its place.
Coming in without waiting
A large new listing does not have to wait for a review. Fast entry requires two thresholds to be met: a full market capitalisation threshold at company level, defined as 2% of the FTSE ST All-Shares Index, and an investable market capitalisation threshold at security level, defined as 15% of the full market capitalisation threshold. The rules illustrate the arithmetic: if the full market capitalisation threshold is 10bn USD, the investable threshold is 1.5bn USD.
Only shares offered at the time of the IPO count towards the investable calculation, with greenshoe and locked up shares excluded. A company offering 18% of its shares at IPO, of which 3% are taken up by cornerstone investors locked in for 180 days, is added with an initial investability weighting of 15%. Addition is implemented after the close of the fifth business day of trading, or concurrently with the review effective date if that fifth day falls in review week. If the addition would take the index above 30 companies, the lowest ranking constituent is removed. Variable, best effort and direct listing IPOs are not eligible for fast entry, because the free float cannot be confirmed, and are considered at the next semi-annual review only if a public disclosure confirming the updated shareholder structure is available by the cut-off date.
