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The changes will be effective at the open of markets on March 20.Tijana Martin/The Canadian Press

S&P Dow Jones Indices said late Friday that it’s making minor changes to the S&P/TSX Composite Index, the broadest measure of the Canadian market.

The index provider said it will add International Petroleum Corp. IPCO-T and Lundin Gold Inc., LUG-T while it will drop Artis REIT AX-UN-T, cannabis seller Cronos Group Inc. CRON-T and finance company ECN Capital Corp. ECN-T. No changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.

The changes will be effective at the open of markets on March 20.

With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the companies. Canadian stocks added to the composite – which has about 230 to 250 members, depending on the quarter – can see a price bump before and even after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.

Research by Morningstar Direct for The Globe and Mail found Canadian mutual funds and exchange-traded funds with assets under management amounting to $252-billion had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended Dec. 31. This included funds that explicitly say they track the index.

S&P Dow Jones Indices uses “float” – the value of shares that aren’t held by insiders and therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes. The index provider does not release its proprietary float calculations.

To get into the composite, a company’s float-adjusted market capitalization must be 0.04 per cent, or four-hundredths of a percentage point, of the total value of the index. Also, companies must be listed on the TSX for at least six full calendar months as of the month-end prior to the quarterly review, so recent initial public offerings will have to wait a bit longer to be considered for inclusion.

To stay in the composite, a company’s float must not drop below 0.025 per cent, or 2.5 hundredths of a percentage point, of the total value of index.