The NASDAQ-100 Index is made up of the top 100 equity securities listed on The Nasdaq Stock Market according to market capitalization. There are a number of criteria that a security must meet to be eligible for initial inclusion in the Index, as well as several more criteria for continued inclusion in the index, as stated by Nasdaq.
The NASDAQ-100 represents the biggest nonfinancial domestic and international securities that are on the Nasdaq exchange. The Nasdaq OMX Group uses a modified capitalization-weighted methodology to calculate the size of the market capital that the listed companies trade on Nasdaq.
The Nasdaq Stock Market launched the NASDAQ-100 in January 1985 and it has since served as a benchmark for financial products, such as options, futures and funds, states Market Watch. The Index is representative of companies from various industries including computer hardware and software, telecommunications, trade and biotechnology.
There are about 10 criteria for eligibility that the Nasdaq uses to evaluate whether or not a security should be included in the NASDAQ-100, states Nasdaq. One of the main criteria is that the security should be exclusively listed on the Nasdaq, unless it has been dually listed on another U.S. market prior to January 2004 and that it has maintained its dual listing since.
Other criteria include that companies should be non-financial, its security should have an average daily trading volume of 200,000 shares, only one class of security per issuer is allowed and that the security is not in bankruptcy proceedings. There are about seven more criteria for the continued eligibility for inclusion in the Index.