The Investment Association and the Association for Financial Markets in Europe (together, the Associations) have published a new code of conduct for the communication of indications of interest (IOIs). IOIs are used by brokers to express their willingness to buy or sell shares at a given price.

The Associations completed phase 1 of the code in 2015 when a distinction was drawn in the code between ‘C:1 Client Natural’ (orders that can be satisfied immediately) and ‘P:1 Potential’ (orders that may not yet be firm and may involve market impact). The Associations have now updated the classification model by adding a complementary IOI category to the Client class to offer investment managers the opportunity to see orders that can be filled in their entirety and those that can be proportionally met. The framework will play an important part in ensuring that block trades can be carried out with a more predictable market impact meaning better client returns.

The Associations have also added a filtering tool on trading terminals to ensure that investment managers can see the orders most appropriate to them. The filtering tool allows managers to distinguish between IOIs that are backed by a client position and those that reflect a position held or wanted internally by a broker.

View Investment Association and AFME revise framework for indications of interest, 22 March 2017