RFS vs RFQ
May 24, 2007
Waratah comments on LH’s use of RFS rather than the RFQ model used by Bloomberg, TradeWeb & BondVision. RFS is preferred because “the banks feel this is the fairest method for both sides of the market”. One can’t help suspecting a degree of self interest on the part of dealers in opting for RFS – surely it can’t all be for the benefit of the buy side ?
With an RFQ, a client is offered a firm, executable price that is good for the “wire time”: three seconds in the case of Bloomberg. If the client clicks hit/lift during the wire time, the trade is done at that price – no ifs and buts. With RFS, the client clicks on a price, which then goes back to the dealer for a last look. The dealer may reject the trade at that point. Does that favour the client or the dealer ?