“A premium listing...is a necessary, but insufficient, condition for entry into the UK Series,” FTSE’s chief executive, Mark Makepeace, reminded us in a recent letter to the FT. “FTSE’s free float requirement is driven by governance considerations, as determined by our customers,” Makepeace stressed in the letter.

If you find the rules on listing standards confusing, you’re not the only one. The UK Listing Authority (UKLA), which is part of the securities market regulator, the FSA, already sets different requirements for so-called premium and standard listing categories. As we mentioned earlier, the LSE, supported by the government, is now proposing a third listing category for perceived high-growth start-ups. Meanwhile an index firm that’s now fully part of the exchange requires a premium listing for inclusion in its domestic share benchmarks and also sets its own standards for the minimum free float of companies listed on the exchange. Got that?

But you can’t escape the obvious potential tensions between the exchange owner, which has a clear commercial interest in generating as much listings revenue as possible, and the index provider that has to cater to a set of constituents with very different concerns. Makepeace told me in an interview earlier this year that the policy groups who set FTSE’s index standards have to be independent, but he conceded that the commercial interests of FTSE and the LSE are not completely in sync (though he said they’re better aligned than before).

With an ever-increasing pot of money following index-based investment strategies, it’s also clear that companies have been motivated to list their shares in locations and on exchanges that promise them index entry and a guaranteed level of buying interest from passive funds. The smaller the percentage of your share capital that you can get away with listing and the greater the popularity of the index, the greater the potential boost to your share price if you view the whole process of going public as an opportunity to cash in at the expense of the broader shareholding public.

The recent case of Nasdaq’s relaxation of its “seasoning rules” for Facebook shares makes it clear that listing privileges and index inclusion can be offered as a commercial package to those companies wanting to go public. Index-based investors should be very aware that they may be the fall guys in these discussions.

There’s been a vocal recent debate over self-indexing and the need (or otherwise) for a third-party index provider to calculate the benchmarks underlying tracker products. Less attention has been paid to index firms’ ownership and their own independence from entities that may have different objectives than ensuring the quality of an index-based investment portfolio. I expect this will change as tensions rise over listing rules and corporate governance standards.

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