InvestmentsAug 25 2015

IA agrees code of conduct to aid liquidity hunt

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IA agrees code of conduct to aid liquidity hunt

The Investment Association and the Association for Financial Markets (AFME) have agreed a new code of conduct aimed at helping fund managers better gauge equity market liquidity.

The code deals with ’Indications of Interest’ (IOIs), used by brokers to show their willingness to buy or sell shares at a certain price.

It aims to ensure ‘block trades’, which involve a large number of shares bought or sold by investment managers, can be carried out more predictably and therefore at the best possible price.

The code makes a distinction between IOIs that can be satisfied without market impact, labelled “Client Natural”, and those that may involve information leakage and market impact, which will be deemed “Potential”.

Bloomberg has agreed to adopt the categorisations, and the trade bodies are now engaging with other relevant vendors.

Daniel Godfrey, chief executive of the Investment Association, said: “Our framework will limit potentially misleading market noise, allow investment managers to see where the real liquidity is and obtain the best price to the benefit of their clients.”

Simon Lewis, chief executive of AFME, said: “It is encouraging that there was such a strong consensus between the investment managers and brokers for a simplified approach that goes beyond any regulatory requirement. The new code of conduct will increase transparency in IOI categories and improve market discipline.”