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R E Q U E S T
don’t think it is something we are
going to be driving particularly
aggressively.”
Information leakage
Among the buy-side, information
leakage is considered to be more of
an issue with the Tradeweb-Plato
Partnership RFQ model, as eBlock
is fully disclosed, meaning that
both counterparties are identifi-
able throughout the process. In
contrast, the LSEG RFQ platform
provides the user with the option
“If I am very honest, it
is not number one on
my to-do list, I don’t
see the relevance for
our book of business
currently.”
ED WICKS, LEGAL & GENERAL
INVESTMENT MANAGEMENT
to trade anonymously.
Adriano Pace, managing director
for equity derivatives at Tradeweb,
and Richard Bateson, product
manager for equities, who was
hired by Tradeweb from Macqua-
rie in May 2018 to lead the RFQ
for equities project, argue that the
tool should be used cautiously and
with information leakage in mind.
Pace stresses that eBlock is not
an uncontrolled RFQ, but it was
designed to provide the buy-side
trader with authority on the nego-
tiation and control of information,
particularly when it comes to
interaction with market makers -
or liquidity providers (LPs) - which
has long been approached with
caution by asset managers.
“The buy-side user has full con-
trol over who they go to and the
62 // TheTrade // Winter 2018
F O R
Q U O T E ]
type of IOIs they interact with - all
of that is at their complete discre-
tion,” Pace adds. “So the control is
completely with the buy-side, and
in fact, they can decide which type
of orders they want to send to RFQ
- knowing the name, and size of the
trade, the LPs they want to interact
with, which should give them a lot
of comfort in that regard.
“When the buy-side trades on the
lit exchange they don’t know who
they are trading with, maybe an
ELP or through an ELP with an SI.
At least with our protocol if they
want to trade with an ELP, they
do so with their eyes wide open
and that’s under their control. For
them, that is potentially a better
option than trading anonymously
with a smart order router with an
ELP and getting picked off.”
Discussing the LSEG’s RFQ for
equities model and the topic of
concerns over information leakage,
Scott Bradley, who currently
heads up sales and marketing for
LSE cash markets and Turquoise,
explains that there are certain
situations where a trader would
not necessarily want to RFQ anon-
ymously, but providing users with
the option to request on a named
and unnamed basis is key to ensur-
ing the buy-side is truly in control -
which is particularly important for
interactions with market makers.
“If you choose to be named you
are making that informed decision
that you wish for activity to be
highlighted to a selected number
of LPs because you have chosen
to be named,” Bradley says. “But
that’s where the power of bilateral
relationships come into play be-
cause you will choose to go named
when you have a good relationship
with that market maker. So the
requester in both cases, named and
unnamed, is really taking control
over that information sharing. So
the expected order size, the fact
you can control who you request
a quote from, and whether you
decide to be named or unnamed
are all facilities that enable the
requester to take full control of the
information.”
Value questions
For the buy-side, information leak-
age seems to be at the top of the
list of concerns with using an RFQ
system in equities, but it isn’t the
only apprehension. Fabien Oreve,
global head of trading at Candriam
Investors Group, highlights that
with actionable IOIs now firmly
placed in the market, it’s difficult
to see where RFQ will add value to
equities trading.
IOIs have suffered a bad rep-
utation in the past, in terms of
defining which indications were
representing true liquidity, but
were reformed a few years ago
following the introduction of an
industry Code of Conduct which
was put together by the Investment
Association and the Association
for Financial Markets in Europe
(AFME).
“We do not see any interest in
using electronic RFQs for cash
equity, because we currently
have easy access to IOIs from our
brokers who advertise reliable,
tradable sizes and prices,” Oreve
says. “IOIs have gained much in
quality since the European indus-
try agreed on an IOI reform and a
new code of conduct some years
ago. The IOI reform introduced
a classification model which has
improved transparency and helped
investors like us find liquidity.
This model is helpful, as it makes a
clear difference between IOIs that
reflect natural liquidity and those
that reflect non-natural, principal