Tuesday, February 11, 2020

Financial Products News #2020 - 3
Nasdaq To Migrate Sector Indexes To New ICB Codes in 2020

Markets Impacted:

  • All Markets

Products Impacted:

  • All Index Products

Contact Information:

  • Nasdaq Global Indexes at +1 844 717 0708 (for US Callers) or +1 301 978 8311 (for International Callers)

What you need to know:

FTSE Russell recently introduced eight (8) character codes for the Industry Classification Benchmark (ICB) code.

Nasdaq uses ICB codes as an input in its sector-based Index creation and maintenance process.

Nasdaq expects to implement the new ICB code structure for its sector-based indexes in 2020.

As Nasdaq confirms its ICB code migration plans, further transition details will be released for the affected indexes.

What is ICB?

Industry Classification Benchmark (ICB) is a globally utilized standard for the categorization and comparison of companies by industry and sector. It is the official sector classification used across FTSE Russell, Nasdaq and other index providers for index creation, analysis, attribution, and performance measurement. The legacy four (4) digit ICB utilizes a four-tier industry categorization system where companies are organized based on Industry, Supersector, Sector and Subsector as defined by FTSE. From left to right, each one of the four characters represents the categories above; Industry indicates the broadest classification while Subsector refers to the most granular. This legacy four (4) digit ICB includes 10 Industries, 19 Supersectors, 41 Sectors and 114 Subsectors.

FTSE Russell recently expanded the ICB code structure to eight (8) characters. The new structure is intended to provide greater market granularity and market transparency. As part of the release, FTSE Russell expanded its coverage to add one new Industry, one Supersector, 4 Sectors and 59 Subsectors. Thus, the new eight (8) digit ICB includes 11 industries, 20 Supersectors, 45 Sectors and 173 Subsectors. FTSE Russell also updated the classification codes for some existing sectors such as Financial Data & Systems and Energy. FTSE Russell is asking all firms to migrate to the new ICB code structure by December 2020.

What is the impact to Nasdaq Index Families?

As noted above, Nasdaq plans to migrate to the new ICB code structure for its sector-based Indexes in 2020. For ease of implementation, Nasdaq plans to move to the new ICB codes on a family-by-family basis. Where possible, Nasdaq will look to make the ICB code change as part of its standard index evaluation and rebalancing processes. Nasdaq will follow its normal communication process for any index changes associated with the ICB code change.

Can Nasdaq Index data products support the new ICB code structure?

Yes. Nasdaq has already introduced new fields, including the eight (8) character ICB code, on relevant Nasdaq Global Index Watch (GIW) and Nasdaq Global Index FlexFile Delivery (GIFFD) Web Services files. For release details, please see Data Technical News #2019-12 and Data Technical News #2019-18.

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