FTSE Group and Dow Jones Indexes, two of the world’s most successful index providers, signed a Memorandum of Understanding today to merge their industry-classification systems to create a single, seamless structure covering equities and corporate bonds globally. The new system will be known as the Industry Classification Benchmark (ICB), and will cover 50,000 companies worldwide. It is expected to take effect by the end of 2004.
The ICB, which is owned equally by both companies, is expected to become an instant global industry standard. The existing FTSE and Dow Jones Indexes systems are already used by the world’s largest stock exchanges, including NASDAQ and the New York Stock Exchange in the U.S., Euronext, the JSE in South Africa, the London Stock Exchange and SWX Swiss Exchange across Europe and Africa. Other major index providers that use the system include FXI (FTSE/Xinhua) in China, the Hang Seng (HSI) in Hong Kong, the Russell 3000 Index family in the U.S. and STOXX Ltd. for its indexes across Europe.
“By merging our industry classification systems, FTSE and Dow Jones Indexes create the industry’s most powerful single standard, uniting the classification structures of the world’s major exchanges, financial media and index providers,” said Mark Makepeace, chief executive of FTSE Group.
“This cooperation is an important step toward enriching the usefulness of corporate classifications to investors globally,” said Michael A Petronella, president of Dow Jones Indexes/Ventures.
The new ICB will be totally transparent and rules-based. An advisory committee of markets experts will guide Dow Jones Indexes and FTSE on the future development of the ICB and, in certain cases, on the classification of individual stocks. The existing FTSE and Dow Jones Indexes Industry Classification systems are scheduled to be fully converted to the ICB by the end of 2004. Indicative data will be available at the end of the second quarter to ensure a low cost and seamless transition for users of the existing FTSE and Dow Jones Indexes classification systems.