Technical Implementation

By Scott Atwell, Manager FIX Trading and Connectivity, American Century Investments

Scott AtwellLeveraging the FIX Protocol to electronically communicate IPO order-related information is a natural extension to the existing FIX-based integration buy-side Order Management Systems already have in place with their brokers. FIX’s Global Buy-side IPO Working Group was able to bring together a number of buy-side firms with similar needs, and we were able to specify how firms can easily use existing FIX messages to support IPOs.

The working group’s recently released IPO Recommended Practice/Guidelines document identifies two workflow models. The first model describes “Point-to-Point”, whereby a buy-side firm communicates directly with the sell-side firm who is acting as the IPO’s “Booking and Billing Agent”.

That sell-side firm would then be responsible to communicate the buy-side firm’s intentions to the other sell-side firms within the syndicate. The second model describes “Multi-broker Deal Hub”, in which the buy-side firm communicates via a single session to a multi-broker deal hub platform – without specifying a specific target broker – where the hub integrates connectivity to all of the relevant sell-side firms.

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The most complex orderflow scenario is “Stepping (Multiple Limit Orders)”, used when a buy-side firm is willing to buy one amount at one price, and more at a better price, in which case multiple FIX limit orders will need to be sent – each one exclusive of the others. FIX’s Global Buy-side IPO Working Group believes that the industry can significantly reduce risk and enhance efficiency and accuracy by leveraging the FIX Protocol for IPOs. Fortunately, several key sell-side firms and deal hub platforms have already expressed interest in working with the buy-side firms to adopt FIX for IPOs.

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