Electronic RFQ and Multi-Asset Trading: Improve Your Negotiation Skills, commissioned by Investment Technology Group Inc. (ITG) and produced by Aite Group, examines the current state of the request-for-quote (RFQ) market, and potential efficiencies that may be gained from electronifying the RFQ process, as well as challenges and opportunities in the space overall.
Key takeaways from the study include the following:
- The trading of highly liquid investment products has benefitted from more than 15 years of technological innovation and regulatory reforms. It is now easier, cheaper, and faster to source liquidity, trade efficiently, and perform transaction cost analysis (TCA). Electronic trading of illiquid and bespoke products has lagged behind electronic trading of plain-vanilla equities. The market structure and the RFQ communications protocol that supports these products are therefore ripe for an integrated and technologically enabled workflow.
- The drivers encouraging the adoption of electronic RFQ include the increasing need to streamline procedures for the trading desk across multiple asset classes and direct calls from regulators and investors to perform and demonstrate best execution. Heightened compliance and regulatory risks are associated with manual and opaque trading workflows, and tolerance among compliance departments for disparate trade auditing solutions is decreasing.
- Electronic RFQ provides many benefits to all participants in the trade life cycle, such as improved price discovery, integration with current workflows, business intelligence, holistic TCA, straight-through processing (STP), operational efficiencies, and regulatory risk reduction.