• The Investment Association and the Association for Financial Markets in Europe (AFME) have agreed a code of conduct for the use of 'Indications of Interest' (IOIs)
• The framework will enable investment managers to gauge more accurately where they can find market liquidity to get the best price for their clients
• The Associations are working with trading platforms and Bloomberg has already agreed to facilitate the new code

The investment industry has taken a major step to improve client returns by agreeing a new code of conduct with brokers to help large share deals complete at the best possible price.

The code will help to ensure that 'block trades', where large numbers of shares are bought or sold by investment managers, can be carried out with a more predictable market impact.

The new framework has been agreed between the Investment Association, which represents investment managers, and AFME, the trade body that represents banks and brokers. It deals with 'Indications of Interest (IOIs)', which are used by brokers to express their willingness to buy or sell shares at a given price. The Associations will work with their members and other market participants on the buy and sell side towards the adoption of these guidelines.

Under the new code, a distinction will be made between two types of IOI. Those that can be satisfied immediately, without market impact, will be labelled as 'Client Natural' and those that may involve information leakage and market impact will be labelled as 'Potential'.

Bloomberg, a market leader in IOI communication, has agreed to adopt the categorisation so market participants can easily identify the class of each communication. It will extend IOI filtering so investors can determine the classes they wish to consider from each contributor.

The Investment Association and AFME are engaging with other relevant vendors to ensure these options are available to all market participants.

Daniel Godfrey, Chief Executive of the Investment Association, said: "The investment industry is taking a lead on improving the efficiency of equity capital markets. 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." 2 

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."

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