IPO Fast-Entry Rule

Install and import#

npm install fintech-algorithms

import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/governance-and-maintenance/ipo-fast-entry-rule";

Signature#

calculate(data)

Admits a large new listing between scheduled reviews. Without a fast-entry rule an index can spend months not holding one of the biggest companies in its own market.

Parameters#

Returns#

{ results, fastEntryIds }

Which candidates qualify and which threshold blocked the rest.

Errors#

• When any threshold is negative — throws

Complexity: time O(n), space O(n).

Worked example#

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input#

{
  "candidates": [
    {
      "id": "IPO-A",
      "floatMarketCap": 1800,
      "liquidityDays": 10,
      "tradingDays": 10
    },
    {
      "id": "IPO-B",
      "floatMarketCap": 900,
      "liquidityDays": 9,
      "tradingDays": 10
    },
    {
      "id": "IPO-C",
      "floatMarketCap": 2200,
      "liquidityDays": 4,
      "tradingDays": 5
    }
  ],
  "minimumFloatMarketCap": 1500,
  "minimumLiquidityDays": 5,
  "minimumTradingDays": 5
}

Call#

calculate(data)

Returns#

object with 2 fields: results, fastEntryIds

{
  "results": [
    {
      "id": "IPO-A",
      "sizePass": true,
      "liquidityPass": true,
      "seasoningPass": true,
      "fastEntry": true
    },
    {
      "id": "IPO-B",
      "sizePass": false,
      "liquidityPass": true,
      "seasoningPass": true,
      "fastEntry": false
    },
    {
      "id": "IPO-C",
      "sizePass": true,
      "liquidityPass": false,
      "seasoningPass": true,
      "fastEntry": false
    }
  ],
  "fastEntryIds": ["IPO-A"]
}

Diagrams#

Calculation flow#

flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate IPO Fast-Entry Rule"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]

stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

• S&P Dow Jones Indices Index Mathematics Methodology — S&P Dow Jones Indices
• S&P DJI Equity Indices Policies & Practices — S&P Dow Jones Indices
• FTSE Russell Capping Methodology — FTSE Russell, LSEG
• FTSE Russell Index Policy and Methodology Library — FTSE Russell, LSEG
• MSCI Global Investable Market Indexes Methodology Library — MSCI
• MSCI Minimum Volatility Indexes Methodology — MSCI
• S&P Risk Control 2.0 Indices Methodology — S&P Dow Jones Indices
• Principles for Financial Benchmarks — International Organization of Securities Commissions
• Regulation (EU) 2016/1011 — European Union
• Portfolio Selection — Harry Markowitz
• On the Properties of Equally-Weighted Risk Contributions Portfolios — Sébastien Maillard, Thierry Roncalli, and Jérôme Teïletche
• Fundamental Indexation — Robert Arnott, Jason Hsu, and Philip Moore
• FTSE Currency Hedging Methodology Overview — FTSE Russell, LSEG

The rest of the Governance and Maintenance family#

• Eligibility ScreenApplies the qualification rules that decide what may be considered for membership at all — domicile, listing status, share clas…
• Liquidity ScreenRequires sustained tradability, not a single good month.
• Free-Float Factor CalculationDerives the free-float factor by removing strategic, government, insider and cross-holdings, then rounds it to a band.
• Reconstitution AlgorithmChooses the membership at a scheduled review, using an incumbent buffer so a name hovering at the boundary is not swapped in an…
• Rebalancing AlgorithmTurns a weight change into the trades that implement it, and reports the turnover.
• Turnover Buffer RuleThe buffer in isolation: a band around the cutoff inside which incumbents keep their place.
• Index Replication-Cost EstimatorEstimates what a rebalance costs to implement — spread, market impact and commission.