CAC 40 Index France

CAC-40 brokers provide access to the French stock market that tracks the performance of the 40 largest companies trading on the Euronext Paris. This article will explore how the CAC-40 is made up, how it works, who its biggest players are and what investors can glean from watching it. Importantly, we also list the best brokers with access to the CAC-40 in 2022 and share tips for comparing platforms.

CAC-40 Brokers

  1. OANDA offers 70 forex pairs with two competitive pricing models and a substantial welcome deposit bonus

    OANDA Corporation is regulated by the CFTC/NFA. OANDA is a member Firm of the NFA (Member ID: 0325821). CFDs are not available to residents in the United States.

  2. Quotex offers a proprietary web platform that has digital options and trading signals.

  3. IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.

Comparing CAC-40 Brokers

Instruments

As well as trading on the CAC-40, investors can also trade with the CAC-40. Many CAC-40 brokers offer products which use the total value of the index as an underlying. One example of this is an Exchange-Traded Fund (ETF).

Exchange-Traded Funds (ETFs)

An ETF is a basket of securities that tracks an index – in this case, the CAC-40. ETFs can consist of all kinds of different securities but, for simplicity’s sake, we’ll imagine that we’ve bought an ETF that contains shares in every constituent Ibovespa stock. The value of our ETF will go up or down in relation to the value of the underlying index over the day’s trading. Admiral Markets, for example, provides day traders access to a variety of exchange-traded funds. This includes the CAC 40 Dividend Index, the CAC 40 Volatility Index, the CAC 40 Governance Index and the CAC 40 Short GR Index.

One major advantage of ETFs is that they generally tend to be low-commission purchases and are cheaper than buying all the constituent stocks yourself. A worry about them is that the demand for them artificially inflates the value of indices, causing price bubbles to form and burst.

Platforms

The best CAC-40 brokers will provide a choice of platform that day traders can use to invest their funds. This may include award-winning platforms such as MetaTrader 5 or TradingView, or bespoke software developed by the broker. Access to historical price data, technical analysis tools and interactive graphs and charts will rank highly. You will want to visually interpret price fluctuations throughout the day across different time frames,  as well as trade directly from charts.

For beginners or those using a new terminal, look out for demo accounts. Real-time market conditions and unlimited virtual funds provide an ideal practise scenario.

Education

Access to educational resources and learning materials can help rank some CAC-40 brokers higher vs competitors. Regardless of your previous investing experience, there is always more to learn. A wealth of online articles, blog forums, video content and keyword glossaries are valuable, particularly those integrated within CAC 40 brokers’ client dashboards. This means you can save time when looking for supporting information, rather than having to scan the internet and flick between tabs.

Interactive Brokers, for example, hosts a full training academy for day traders with a catalog of resources suitable for beginner, intermediate and advanced investors. Learn more about the French economy, major shifts in qualifying companies and the impact of the Eurozone on the exchange.

Deposits & Withdrawals

CAC-40 brokers that work seamlessly with local deposit and withdrawal solutions may rank highly in your comparison. If you are a French citizen, CAC-40 brokers that offer Cartes Bancaires (CB) credit/debit cards and wire transfers may be the most appealing so you can fund an account and begin investing right away.

A low minimum deposit requirement should also be a key point to look out for, particularly if you are just starting out. You can start trading the CAC 40 with FBS with an initial deposit of just €10 or equivalent currency.

Remember, currency conversion fees may apply if you are depositing in a currency outside of the accepted account denominations. Bear this in mind when comparing CAC-40 brokers and before opening a live account.

What Is The CAC-40?

The CAC-40, which stands for Cotation Assistée en Continu (Continually Assisted Quotation), was first formed in 1987 and runs from the Paris Bourse in the Palais Brogniart.

Since 2000 it has been operated by Euronext; a huge stock exchange operator also responsible for the benchmark indices of Amsterdam, Brussels, Dublin and Lisbon. It operates from 09:00 to 17:35 on trading days, with values calculated every 15 seconds.

The CAC-40 represents the 40 largest French, or qualifying, companies according to free float adjusted market capitalization (more on this later) and its make-up is reviewed quarterly.

The top CAC-40 brokers offer access to individual stocks and shares, alongside products that track the overall index.

The CAC Family Of Indices

The CAC-40 is the head of a larger family of French market indices. Below it is the CAC Next 20, which represents the next 20 largest French companies by market cap.

The CAC Large 60 combines both of these, whilst the CAC Mid 60 lists the next 60 biggest companies that don’t qualify for the Large 60. Both the Large and Mid 60 indices are then combined to make the SBF-120.

Any French companies in the index universe that don’t qualify for these are included in the CAC Small. The CAC Mid 60 and Small indices are joined together in the CAC Mid & Small. Finally, the CAC All-Tradable draws all of the above together into one index.

CAC-40 Variations

There are some variations available at CAC-40 brokers that are calculated in different ways and for different purposes. These include:

CAC-40 EW

The CAC-40 EW is an equally weighted version of the CAC-40, introduced in 2009. The component companies are the same as the parent index, but they are all afforded a weight of approximately 2.6%.

CAC-40 EXT

The CAC-40 EXT is calculated on the basis of future contracts traded on the Euronext Exchange.

Note, not all CAC-40 brokers will offer access to each of these indices.

What Is The CAC-40 Used For?

You can see from the amount of CAC indices that when we’re looking at CAC-40 brokers, we’re looking at the premier league of French stocks. In fact, the CAC-40 accounts for over 80% of the total market cap value of the CAC All-Tradable. It is, therefore, a good gauge of how the whole French economy is performing.

When you consider that France accounts for one-fifth of the total European economy, that its operator Euronext is the largest stock exchange in Europe and that French companies account for nearly two-thirds of the Euronext 100; then its significance as a barometer for the wider European economy’s health also becomes clear. This makes it an exciting index to trade via registered CAC-40 brokers.

How The Index Works

The constitution of the CAC-40 is based on several factors. The most important of these are:

  • Whether the company qualifies to be considered
  • The free float adjusted market capitalization of qualifying companies
  • Free float adjusted annual velocity

Let’s look at each of these in turn:

Qualifying

Although it’s the benchmark French index, a company doesn’t necessarily have to be French to be included on the index and available at CAC-40 brokers. The rules state that to be eligible for selection a company must trade in Euros and have Euronext Paris as its reference market – although it can still be featured if it has a different reference market but fulfils other criteria, such as significant trading presence in France. This is why there are currently two multinationals in the CAC-40 which list Euronext Amsterdam as their reference market.

Free Float Adjusted Market Capitalization

Since 2003, companies eligible for the CAC-40 have been selected according to their free float adjusted market capitalization. At its most basic, this means the market value of all of a company’s outstanding shares. These are all the shares issued by a company, including those owned by company insiders, CEOs or directors, or subsidiary holding companies.

To work out a company’s market capitalization, the following formula is used:

Company’s share price x number of outstanding shares

The free float factor then redefines the outstanding shares by subtracting any restricted or closely-held shares; therefore, only taking into account shares that are theoretically tradable on the market (any shares not quoted in Euros are also excluded).

This changes the equation to the following:

Company’s share price x (number of outstanding shares – closely-held/restricted shares)

Weighting

Another feature of the CAC-40 is that it is a weighted index, which is capped at 15%. This means that each of the 40 companies accounts for a percentage of the index, but cannot account for more than 15% of the total.

The theory behind such a cap is that it stops the performance of one company having too great a bearing on the CAC-40’s performance.

A company’s CAC-40 weighting is calculated by dividing its free float market capitalization by the total market capitalization of the whole index. At present, the largest company on the CAC-40 has a weighting of just over 10%. The best CAC-40 brokers will also provide this information within their product specification webpage.

Free Float Adjusted Annual Velocity

Component companies of the CAC-40 must have an annual velocity of at least 20%. In basic terms, this means that a company must be trading a certain number of its outstanding shares at a certain rate. In this case, the velocity is found by dividing the number of shares sold by the number of free float adjusted outstanding shares listed.

This is calculated daily and added up over the course of a year to find the annual velocity.

Changes

The make-up of the top 40 list is reviewed quarterly on the third Friday of every March, June, September and December.

Reviews are conducted by the Conseil Scientifique, an independent supervisory body which monitors the index, and Euronext’s Index Team. September also counts as the annual review, when the number of shares included in the index and the free float factor are updated.

Changes to the make-up can be made at these reviews. Using the criteria described above, the Conseil Scientifique and Index Team look at the performance of the component companies, with the latter making recommendations to the former about any changes that should be made.

Buffer Zones

There is an element of fluidity to the composition of the CAC-40 in that it employs a buffer zone. In reality, only 35 companies are guaranteed components. The companies ranked 36th to 45th form a ‘buffer zone’, which allows for companies to move in and out of the top list depending on their performance. Companies that are already constituents are given priority over those ranked outside the top 40.

Trading

As well as tracking the performance of stocks, the CAC-40 itself also acts as an underlying for structured products, futures, options, funds and exchange traded funds (ETFs). And the top CAC-40 brokers will offer opportunities in a range of instruments.

Key information that day traders should be aware of:

  • It only trades in euros (CAC-40 brokers usually provide accounts denominated in euros).
  • You can trade futures contracts on this market from 06:01 to 19:59 GMT, Monday-Friday.
  • All CAC indices are measured in points that move in increments of 0.5.
  • The free float factor used in calculating a company’s market cap is rounded to the nearest multiple of 5%.
  • The full market capitalization of the CAC-40 is currently €1627.1 billion. The free float adjusted total is €1195.7 billion.
  • Prior to 2003, it was weighted using total market capitalization. It switched to the free float adjusted method to stay in line with other major indices.
  • When the CAC-40 was first formed in December 1987, its base rate was 1000.
  • The highest rate was achieved during the dot-com boom, closing at 6922.33 on 4th September 2000. The same day, it had reached an even larger intraday high of 6944.77.
  • Its lowest rate was back in 1988, when it dropped to 893.82.
  • Many leading CAC-40 brokers and platforms are highly regulated and trusted by retail traders.

Performance Points

The performance of any stock market depends on many factors, and the CAC-40 is no exception. As we’ve seen, the CAC is a benchmark not just for the French economy but also an indicator of the wider European economy. Among the factors that can affect the overall performance of an index are a nation’s GDP, employment and unemployment figures, political events such as general elections, interest rates etc.

Such an example occurred in 2017 when the index hit a nine-year high in response to the news that the pro-European Emmanuel Macron was likely to become French president, as opposed to a more radical Eurosceptic candidate.

Importantly, the best CAC-40 brokers provide integrated economic calendars to help traders stay abreast of relevant events.

Brexit Exposure

With Paris just over 200 miles away from London, the CAC-40 has not been immune to the upheaval caused by the on-going Brexit saga. That said, despite a large drop immediately after the vote in June 2016, and more recent jitters, the CAC-40 has generally tended towards a bullish, or upward, trend.

Overall, the French markets seems to be keeping in line with other major indices by shrugging off any uncertainty both in the UK and the rest of the Eurozone. One reason for this current buoyancy is the strength of the Chinese economy.

Biggest Companies

There are different ways to look at who the biggest players in the CAC-40 are. If we go by the market weight of a sole company then Total, one of the world’s largest oil companies, is by far the biggest player, holding a market weight of 10.48% (by contrast, the next largest companies hold a weight of 7.62%).

Of the 18 sectors currently represented in the entire index, the two largest are Personal & Household Goods and Industrial Goods & Services, with sector weights of just under 14% each. The largest companies in these sectors include household names such as Airbus and L’Oreal as well as LVMH; a conglomerate formed by the merger of aspirational brands Louis Vuitton, Moet & Chandon and Hennessy.

Although Total are, by far, the largest company listed – they account for the whole of the Oil & Gas, the CAC 40’s third largest sector – the rest of the top ten companies, including the three mentioned above, Sanofi, Air Liquide, BNP Paribas, Danone, AXA and Vinci account for well over half of the total weighting, and, therefore, a sizeable portion of the whole French index universe.

How To Start Trading On The CAC-40

There are plenty of options for you to begin trading on the CAC-40, but there are also things to consider first. Any stock market is a complex, high-risk investment situation. If you’re not familiar with issues such as French domestic politics or business news, then it would be advisable to consider whether this is the stock market for you. If you’re willing to take an active interest in areas such as those discussed above in Performance Points, then the next step is to compare CAC-40 brokers using the guide above to find the one that suits your investment goals.

Choosing The Right Stock

Volume

Volume is the best indicator when deciding the right stock to open a position on, or the right time to close an existing position. Volume is the amount of shares that have been traded. Each transaction is only counted once (so if A sells 10 shares to B, the volume is 10, not 20 because A sold to B and B bought from A). Price movements based on higher volumes are more robust than those on low volumes.

Top-rated CAC-40 brokers offer a range of volume indicators within their trading platforms and terminals.

Volatility & Beta

Volatility is an important measure of how stable a stock’s price is. One way of measuring comparative volatility is beta. The Beta formula compares the volatility of the index, to that of a given stock.

Read more about these values on our guide to trading strategies. And again, the best CAC-40 brokers will offer indicators and tools to help measure volatility.

CAC-40 Live Price Chart

Final Word On CAC-40 Brokers

Use our comparison guide to choose between the top CAC-40 brokers. We have ranked the best brokers that offer trading on the CAC-40 in 2022. And as an index that reflects not just the French economy, but a sizeable percentage of the Eurozone economy, the CAC-40 has plenty of potential for investment. The strategies outlined above can all be used to your advantage when trading on or with the index. Of course, as with any investment, you should ensure that you have a firm grasp of both trading and the domestic situation in France before putting your money down.

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