Snap has been blocked from featuring on indices by FTSE Russell because it does not offer shareholders any voting rights.
The group took the decision after concerns were raised by investors on the back of the tech company's IPO, with the Investment Association also urging MSCI Global and S&P Dow Jones to exclude firms with non-voting shares.
The London Stock Exchange Group owned FTSE Russell is the first to come to a decision on the matter, deciding that companies in the benchmark must offer non-restricted shareholder voting rights of at least five per cent from September.
It means funds linked to indices will not be forced to buy shares in companies in which they have no say. It also applies to newly listed US tech company Blue Apron, while existing companies in the indices which do not reach the threshold, such as Dell, Hyatt Hotels and Tinder owner Match Group, will be given five years in which to amend the voting rights.
FTSE Russell said it "believes that the proposals set out in this document represent a pragmatic compromise between those that believe the Snap IPO set a dangerous precedent for companies to come to the market with few, if any, voting rights attached to their securities, and those respondents who believe the role of the index provider is to represent the investable opportunity set as comprehensively as possible."
The move comes as the first of Snap's lockup periods comes to an end. That means shareholders such as pre-IPO investors, founders, employees and banks who were underwriters of the listing can now cash out for the first time and a flood of new shares could hit the market.
Snap's lockup ends on Saturday with Monday 31 July set to be the first day of trading after it ends. However, Edison analyst Richard Windsor said investors will be less keen to get rid of them as there has already been a big sell off.
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Snap shares are down more than 40 per cent and below their IPO price of $17. Short interest in Snap fell in July, compared to the previous month, when it was found to be the most shorted tech stock of the year, due to the high cost of borrowing making it less attractive for short selling according to research by S3 partners. It estimates between 10 and 30 per cent of the 420m early investor shares will hit the market. A further 800m could flood the market by the end of August.
Facebook shares were mixed when several lockup periods expired after its IPO in 2012. Stock rose more than 10 per cent when its biggest tranch of 800m shares hit the market. At the time it was 45 per cent down on its IPO price. But shares dipped around four per cent after an initial lockup period ended beforehand, releasing around 270m shares.
Twitter shares fell by nearly 18 per cent when its lockup ended and more than 500m shares were made available, while LinkedIn slipped three per cent when 24m shares were sold.