In 2014, a number of Buy-side companies met to discuss ways to make the placing of orders for equity IPOs and fixed income New Issues more efficient and transparent. By trying to replicate the order placing process in the secondary market and replace the current manual process, the goal was to remove the risk of error in transmission or misinterpretation by the receiver of those placed orders.
IPO Best Practices document
The Best Practices document sets out recommendations to create a straight through process (STP) for the electronic transmission of new issue orders using the FIX Protocol through from an asset manager’s Order Management System, to the new issue Deal Managers and receive allocations from it. To access this document, please click here.
The benefit from the asset manager’s perspective is not only greater clarity and efficiency but this will also provide the added value of a fully audited, time-stamped order generation process that has already cleared an asset manager’s pre-trade compliance checks to ensure no breach of mandate or risk control before it could be sent to the deal manager.
Supporting buy-side companies and comments
Among the buy-side companies supporting this initiative are: American Century, AXA IM, Baring Asset Management, Capital Group, Fidelity Worldwide Investment, J.P.Morgan Asset Management and Newton.
- Adam Conn, Head of Dealing, Baring Asset Management, Co-Chair FIX Trading Community Global Buy-Side Committee, commented, “The FIX Global Buy-side IPO working group is seeking to use automation to mitigate risks associated with the manual placement of new issue applications and receipt of allocations, which may be amongst the largest single orders a firm will place. We are mindful of doing so in a manner that lends itself to future evolution of technology in the book building process in whatever direction that takes. There is still a lot of work to be done but would like to take this opportunity to thank our industry colleagues for their support thus far.”
- Scott Atwell, Manager FIX Trading and Connectivity, American Century Investments, noted, “Leveraging the FIX Protocol to electronically communicate IPO order-related information is a natural extension to the existing FIX-based integration Buy-side Order Management Systems already have in place with their brokers. FIX’s Global Buy-side IPO Working Group was able to bring together a number of Buy-side firms with similar needs, and we were able to specify how firms can easily use existing FIX messages to support IPOs.”