The Investment Association (IA) and the Association for Financial Markets in Europe (AFME) have agreed a code of conduct for how investment managers and brokers work to get the best share prices for large orders.
The “indicators of interest” agreement helps managers gauge more accurately where they can find market liquidity.
The IA represents investment managers whereas AFME represents banks and brokers and the agreement should help to improve client returns.
“Indications of interest” is a term used by brokers to express their willingness to buy or sell shares at a given price, but there is sometimes a risk of information leakage.
Financial information provider Bloomberg has agreed to adopt the rules, which essentially split indications of interest into two categories. Those trades that can be satisfied immediately, without market impact, will be labelled “client natural”; and those that may involve information leakage and market impact will be labelled “potential”. Bloomberg is to make these categorisations available to investors.
Both industry bodies will work with their members and other market participants on the buy and sell side toward adopting the guidelines.
“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,” says Simon Lewis chief executive of AFME.
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