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From Idea to Investor Access: What It Takes To Innovate in the Primary Markets (Part One)

Herb Werth, Managing Director of Buy Side Product Strategy and Marketing, talks about how the buy-side and sell-side have come together to change the way deals get done.

In January, Ipreo launched Investor Accessan industry-led initiative that allows institutional investors to submit orders directly, through our system, to the sell-side syndicate banks on fixed-income new issues. The program is the result of an ongoing development process that featured collaboration from both the buy-side and sell-side communities with whom Ipreo works every day.

Now that we are in the second quarter of 2017, and momentum continues to grow on Investor Access as more and more firms use the platform to execute deals, the Ipreo Blog sat down with Herb Werth, Managing Director of Buy Side Product Strategy and Marketing, to discuss why Investor Access was necessary, how things are going, and what’s next, in this three-part series.


Blog: Tell us about the genesis of the initiative. This started by request from the banks, right?

Herb Werth (HW): Essentially, yes. In speaking with our investment banking clients, we knew how eager they were to streamline their processes, in particular, to be able to deliver deal information to, and receive orders from, the buy side in a more efficient and automated fashion.

Blog: How do you begin to tackle a project of that scale and complexity?

HW: We realized that what we were talking about was essentially modernizing the way the markets work. Both the investor and the bank play an active and important role in the process, and the banks are very knowledgeable about the things they need to do to bring the deals to market in a way that’s compliant with regulations. When it comes to improving the existing process, you have to understand what’s working well – and ensure that those aspects are preserved throughout the process – and then look at those areas that can be enhanced to determine which ones move the needle the most. The best way to do that is to work in partnership with the interested parties to build consensus around a solution.

Blog: How do you ensure buy-in from both sides?

HW: We have strong relationships with our buy- and sell-side clients. We work with them to understand their challenges, and we design solutions that will serve their needs; that collaboration has been crucial. To get a high level of buy-in, you first need to have an idea that improves things for the parties involved, and you have to listen to the suggestions and concerns from those parties. As the process develops, it’s not linear, it’s a feedback loop; we synthesize and incorporate their feedback on an ongoing basis. That process doesn’t stop once we’ve launched the platform. So, in addition to simply growing the number of deals that are done on the platform and increasing the size of the community, we’re also listening to feedback to help us decide where to take the platform next. We’re constantly making sure that what we’re developing is sympathetic to how our clients want to work.

Blog: Which requires constant communication…

HW: Yes. Ipreo is in a good position here. If you look at the footprint of our bookbuilding and IssueNet business, Ipreo really is the leading solution provider in bringing new bond issues to market. I only mention that because our relationships with the banks that use these platforms enable us to more easily have these conversations about what can be done to improve these processes as an extension of the service we could provide to them. We’ve also built a robust community on the buy side as well, and that group has been especially interested in improving the existing processes that have been largely unchanged for a long time. We realized pretty early on that in order to move forward, we needed to bring the market participants together and help facilitate that discussion.

Blog: And what did you learn?

HW: Through those conversations, it became clear that the buy side really had two key problems: they wanted to get terms and conditions in a more consumable format than they get today, and wanted to be able to communicate their orders and receive their allocations in a more efficient way (which tended to be electronically). Investors have been feeling this pain for a long time, so knowing that the sell side was involved in trying to alleviate it was comforting to them.

Blog: What was the collaboration process like as you prepared to launch?

HW: As we shifted our focus from building to implementation, we looked to the network we had created. We had established steering committees with both the buy and sell side, and we made sure to get their support for our testing and roll-out process.  Both the buy-side group and sell-side group worked together with us to run a number of sample deals to make sure that everyone was comfortable with the workflow and the functionality of the system. We did dozens of smaller tests in order to make sure that all firms that were interested could participate, and this led up to a larger market-wide simulation this past December which ran the full deal workflow with all market participants and demonstrated that the platform was scalable and ready for production use. The banks chose to run their first live deal during the first week of January of this year, and since then we’ve seen a good uptake by both the banks and the investor community in using the platform.

Next week, part two of the series will take a deeper dive into the challenges of the current market…

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