The battle for book-building 2.0

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Investor Access, the electronic book-building initiative run by US-based fintech Ipreo, celebrated its first year of operation in early November with some healthy usage statistics.

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For instance, 27 banks were publishing deals on the system by October, up from 11 in January, and more than 90 investor organizations have placed orders on the platform. It now claims involvement in 80% of euro issuance and 65% of sterling issuance. 

Impressive stuff. There is just one problem: the US. There is a glaring absence of large US players in its roster of participating banks, spearheaded by HSBC and BNP Paribas. 

Investor Access has taken off far more quickly in Europe, where the market is much more fragmented and automation can deliver big efficiencies. In the US, progress has been slow. 

This is something that cannot be ignored, given that market’s domination of fee pool and issuance volumes. In the first half of 2017, the US accounted for 40% of global debt capital markets volume and 58% of global DCM underwriting fee revenue. 

Another hurdle

It is not just the very lucrative nature of the bond underwriting status quo at US dealers that is a hurdle for Investor Access. It is the fact that in 2014 private equity funds managed by Blackstone and by Goldman Sachs acquired the business from KKR. 

Many DCM market participants that Euromoney has spoken to recently state quite bluntly that Goldman’s involvement in Investor Access is a big problem for them.

It is little surprise therefore that three of the largest US DCM underwriters – Bank of America Merrill Lynch, JPMorgan and Citi – are now rumoured to be working on their own proprietary electronic book-building platform to rival Investor Access. 

When questioned by Euromoney, none of the three confirmed the existence of this project on the record. 

However, controlling the automation of US dealer book-building is quite a prize – and the dealers themselves want to take control of the process.