SPY is just the top 500 U.S. companies by market cap. The index in question of course is the S&P 500 Index, or "SPX." The S&P has many methodologies that cover everything from corporate action handling to the mathematics behind index calculation to the process to adjust for free float (shares determined to be free and available to trade) and even the Global Industries Classification Standard (GICS) they use to classify and categorize every listed equity.