Bloomberg Drops BICS for ICB, GICS

In another move toward openness, Bloomberg is to adopt two rival standards for classifying securities by industry sector, the Global Industry Classification Standard from Standard & Poor's and MSCI, and the Industry Classification Benchmark from Dow Jones and FTSE.

S&P announced that Bloomberg would use GICS in its Bloomberg Professional terminals last week. But sources tell IMD of a separate deal between Bloomberg and ICB in which Bloomberg has agreed to use the ICB standard in all Bloomberg terminals and its B-Pipe datafeed. "Basically, anybody who keys in an industry code to search for research or anything else will be using ICB codes, and Bloomberg will attribute them as ICB codes," says a source familiar with the situation.

The source tells IMD that the Bloomberg deal was signed about two weeks ago. It is initially for a five-year term, but it includes clauses relating to fees and rights to the standard beyond that period that anticipate longer-term use of ICB, the source says.

Bloomberg currently has its own industry classification standard, BICS (the Bloomberg Industry Classification System). Bloomberg is expected to replace this with ICB over a three to six month period. The migration will begin with Bloomberg mapping its BICS codes to those from ICB, after which it will start to use ICB codes for all new securities.

Bloomberg also has a team of staff generating and assigning BICS codes for all new instruments included in the data terminals and B-Pipe. But these proprietary codes represent a cost that does not provide a return. "It's an expense they can't recover because they can't leverage it outside of Bloomberg," the source says. By introducing ICB, those staff could be switched to more valuable roles.

Industry Impact

In addition, ICB could potentially bring in more business and improve efficiency when using Bloomberg data. ICBwill be hoping that the use of Bloomberg data in research reports from sell-side research departments will lead to the use of ICB codes by those departments, which have traditionally used older rival GICS. GICS, meanwhile, will be hoping that its deal will reinforce its position. S&P says GICS is used by 90 percent of the leading sell- and buy-side firms.

Either way, the deals should improve the efficiency of communications between the buy and sell side, as ICB has made inroads into buy-side firms and the custodians, such as Northern Trust, Bank of New York and State Street, that provide them with reports.

If ICB and GICS make electronic communications easier, then the move could also see Bloomberg steal a march on Reuters, which does not use ICB. With feed handlers now available for users to distribute data from Bloomberg's B-Pipe feed over Reuters' RMDS data platform, firms using the standard may opt for more of Bloomberg's data because it incorporates ICB.

Jerry Moskowitz, managing director of FTSE in New York, says, "We can't comment right now, but I can confirm there have been discussions."

Bloomberg did not respond to requests for comment by press time.

Max Bowie