The Investment Association (IA), the trade body which represents UK investment managers, has published its most recent Position Paper calling for the automation of IPOs and block trades, arguing that it is a necessary step to modernize the UK capital market and make it more efficient and competitive.

Full paper available here. Key highlights include:

• Current issues: The current manual process is inefficient, prone to errors, and lacks transparency.
• Benefits of automation: Automation would improve efficiency, reduce risk, and increase transparency.
• Solutions: New trading services vendors can provide the necessary technology to automate the process.
• FIX protocol: The protocol is a key component in the automation of IPOs and block trades, providing a standardized way for market participants to communicate and exchange information electronically (more information on the protocol here).
• Call to action: Effective collaboration between the buy-side and sell-side will be essential for adopting and integrating these technological advancements, ensuring a smooth and successful transition to automation.

Commenting on the paper, Galina Dimitrova, Director, Investment and Capital Markets at the Investment Association, said: “As major investors in UK businesses, the investment management industry is committed to ensuring the UK remains a globally attractive environment for companies to list, invest and do business. Recent reforms to the UK Listing Rules have made positive changes to attract high-quality companies to list in the UK, while also maintaining good standards of disclosures and transparency.

However, IPO and secondary market placements remain one of the few areas in modern capital markets that are still reliant on manual processing to communicate demand. It’s high time that this process is modernised.

We are therefore calling for buy-side and sell-side collaboration to embrace technological advancements and automate the IPO process. Streamlining the process with electric orders would enhance efficiency, reduce risk and provide greater transparency for end investors. In turn, increased automation could facilitate capital raising and enhance the appeal of UK markets. IPO automation will only be a success with collaboration between the buy side and the sell side. By joining forces to modernise market infrastructure, we will ensure that the UK investment management industry can evolve to meet the demands of the future and further enhance the UK’s leadership in capital markets and innovative financial services.”

The FIX protocol is owned, maintained and developed through the collaborative efforts of FIX Trading Community member firms, which include many of the world’s leading financial institutions.

Jim Kaye, Executive Director at the FIX Trading Community, added: “This is an area that is ripe for electronification – we welcome this initiative and stand ready to leverage the expertise of our member base. Our history of designing standards to automate trading shows what’s possible and we believe automation of the IPO process is achievable when you have the right people behind it.”

Source: IPO