What Is the Industry Classification Benchmark?
The Industry Classification Benchmark (ICB) is a company-classification system for stocks developed by Dow Jones and the Financial Times Stock Exchange (FTSE). FTSE International Limited, trading as FTSE Group and FTSE Russell, is a British provider of stock market indices and associated data services, wholly owned by the London Stock Exchange (LSE) and operating from its headquarters in Canary Wharf. The ICB is a system that classifies both domestic and international stocks. Each company is allocated to the subsector that most closely represents the nature of its business, based first and foremost on its primary source of revenue.
Understanding the Industry Classification Benchmark (ICB)
The Industry Classification Benchmark (ICB) is a globally recognized standard, which is operated and managed by FTSE Russell, and used to categorize companies and securities across four levels of classification. With approximately 100,000 securities classified worldwide, the ICB provides a comprehensive source of data along with a categorizing system for investors around the globe. The principal goal of the ICB is to categorize individual companies into subsectors, based on each company's major source of revenue. The ICB has a four-tier, hierarchical industry-classification structure. The ICB uses a system of 10 industries, split into 18 super-sectors, and further divided into 39 sectors, which, in turn, contain 104 subsectors. The first- and second-level industry and super-sector tiers are designed to support investment strategies that depend on such classification. The ICB drills down further at the third- and fourth-level sector and subsector tiers.
The ICB is adopted by stock exchanges around the world, including Euronext, NASDAQ OMX, London Stock Exchange, Taiwan Stock Exchange, Johannesburg Stock Exchange, Borsa Italiana, Singapore Stock Exchange, Athens Stock Exchange, SIX Swiss Exchange, Cyprus Stock Exchange and Boursa Kuwait. These exchanges represent over 65 percent of the world's market capitalization. The ICB offers investors two levels based on time. There is the weekly database, where product files are generated on the last business day of the week and available by 10:00 p.m. EST. There is also the daily database, where files containing daily changes are produced at the end of each business day of the week and are available by 10:00 p.m. EST.
Comparing Industry Classification Benchmark With Other Benchmarks
The ICB is a single standard that defines the market. The ICB competes with the Global Industry Classification Standard (GICS) for equities, which was developed in a partnership between Standard & Poor's and Morgan Stanley Capital International. It’s worth noting that most of the same sector and industry designations exist in both the GICS and the ICB. (For related reading, see "GICS vs. ICB Stock Classification: What's the Difference?")