Index provider FTSE Russell has announced changes to its Industry Classification Benchmark (ICB), a classification taxonomy used to segregate markets into industries and sectors. The adjustments include real estate becoming the eleventh ICB Industry, as well as a reshuffle of the telecommunications sector to better reflect the present state of industry evolution.
The adjustments to the ICB will see Real Estate segmented out of the financials industry to become the 11th industry.
The changes follow a recent market consultation on current investor practices.
The new ICB structure will be effective after market close on 31 December 2018. The transition dates for individual FTSE Russell index series will be announced by June 2018.
The ICB was developed by FTSE Russell and Dow Jones in 2005 and is now solely owned by FTSE Russell. Under ICB, each company is allocated to the subsector that most closely represents the nature of its business. Approximately 100,000 equity securities worldwide are currently classified by the ICB system.
Full details of the changes are as follows:
- Addition of Real Estate as the 11th ICB Industry (segmented out of the ICB Financials Industry).
- Expansion of the ICB Telecommunications Industry to include Telecommunications Equipment (from the Technology Industry) and Cable Television Services (from the Media Sector).
- Adoption of Consumer Discretionary and Consumer Staples Industries; currently, ICB groups companies by Consumer Goods and Consumer Services at the Industry level.
- The ICB Oil and Gas Industry will be renamed Energy and be grouped at the Sector level as Renewable Energy or Non-Renewable Energy.
- ICB will add 57 Subsectors bringing the total to 171 (from 114) and will update definitions accordingly.
- The ICB numeric code system has also been redesigned to support future enhancements and ICB’s expansion beyond the current coverage of ~100,000 equity securities.
The changes will broadly increase the symmetry between the ICB system and the Global Industry Classification Standard (GICS), jointly developed by MSCI and Standard & Poor’s in 1999. Last year, GICS spun out real estate to create the new 11th sector and the system is currently under consultation on whether to adopt a proposal to reorganise the telecommunications sector, results of which are expected in November this year.
ETFs that use FTSE Russell sector indices include the Direxion financial services leveraged long and short ETFs.