ICAP Adds To Equity RFQs

Shanny Basar

ICAP, part of interdealer broker TP ICAP, has launched Fusion RFQ to bring risk pricing historically reserved for the largest financial institutions in equities and exchange-traded funds to smaller professional firms.

Patric Okumi, ICAP

Patric Okumi, head of EMEA sales – equity RFQ at ICAP, told Markets Media that execution channels available for smaller Tier 2 and 3 firms were often more limited, if not more expensive, than for Tier 1 firms. He said: “This is the result of trading activity – volumes and frequency – in addition to the resources available to be abreast of new tools available.”

RFQs have traditionally been used in less liquid asset classes, such as fixed income, where the buy side sends a request for prices to a number of dealers but were introduced in cash equities in the European Union after MiFID II went live at the start of 2018. The regulation aimed to  encourage trading on lit venues, and also required stronger evidence of best execution. The protocol can be used in cash equities when there is urgency and clients want the guarantee of hitting the price on the screen, or as an alternative when trading in larger size, or to get a more aggressive price.

ICAP’s Fusion RFQ is intentionally positioned for smaller firms looking to trade single stock equities up to $2m and ETFs up to $50m. The platform covers more than 14,500 European Union and US single stock equities, including UK small-caps and global depository receipts, and ETFs which are available to trade pre- and-post market hours.

“This segment was identified as being the sweetspot for our liquidity providers – a community we are in partnership with to attract and deliver benign, non-toxic order flow,” said Okumi.

These orders are also not big enough to be viewed as cannibalising the high-touch desk business. The RFQ model is anonymous so clients only need to onboard ICAP Securities Limited to access risk pricing from more than 30 liquidity providers in both equities and ETFs.

“For requesters, pricing behaviour of this calibre by liquidity providers allowed efficient execution of orders with even the biggest and most illiquid of their requests being able to be executed in just one second,” added Okumi.

The orders may otherwise have had to be worked meticulously via high-touch or via a VWAP algorithm.

“As a firm, we are excited to be introducing an innovative MIFID II compliant solution to a well deserving buy-side community,” he said. “Our colleagues across our 33 global offices are aiding this effort inviting clients to access the platform and we are entering into a number of strategic partnerships with innovative like-minded order management system firms servicing our Tier 2 and Tier 3 target client base.”

Okumi continued that ICAP envisages increasing functionality and adding more asset classes as the platform evolves.


Tradeweb Markets, the electronic trading venue, and Plato Partnership launched an RFQ protocol, Tradeweb Plato ‘eBlock’ last year. Plato is the not-for-profit industry group representing asset managers and broker dealers which aims to improve market structure and achieve better results for end-investors.

Adriano Pace, Tradeweb

Adriano Pace, head of equities EU at Tradeweb, told Markets Media: “Our European ETF RFQ platform went live in 2012, and although the trading philosophy is different, it has given the market a high degree of confidence that RFQ as an order mechanism works consistently for risk transfer.”

In eBlock the identities of the counterparties are fully disclosed, which Pace said guarantees good behaviour from buy- and sell-side traders.

“In addition, what differentiates our platform from other offerings is that the buy-side has to initiate the process and can choose whether to disclose certain details, such as trade direction and full size,” he added.

Pace continued that a third party has analysed the firm’s RFQs and found that, in terms of reversion and market impact, stocks behaved in a similar way throughout the trade lifecycle as in other comparable venues, despite the average trade size being larger, at between €1.1m and €1.2m.

“In the last calendar year, 48% of all enquires resulted in completed trades,” said Pace. “Trade sizes are, on average, 3.5 times the Esma band size and 18% of average daily volume.”

Tradeweb’s automated intelligent execution tool, AiEX, was extended to cash equities several months ago.

“Clients are able to refine their AiEX parameters, so that, for instance, the trade can only be executed if it matches or improves on the BBO,” added Pace.

Tradeweb said in its review of last year that 23.1% of all institutional trades executed on its platform were via AiEX, 9.6% higher than in 2018.

“Amid the recent volatility, it would have been a real challenge for market participants to handle the increased number of RFQs without AiEX,” said Pace. “Automation has definitely freed up the buy-side to focus on the more complex transactions.”

Pace is confident that the growth of AiEX will continue and increasingly larger trades will be automated.

“Going forward, the platform will include a variety of indications of interest meeting the AFME conventions, which we have already built in,” he added. “Post-trade analytics already include dealer rankings based on time-to-quote, hit and quote rates.”


Instinet was the first to launch an RFQ model in European cash equities with Blockmatch MTF in 2018. Ben Stephens, global head of product management at Instinet, said the agency broker’s RFQ is differentiated because it is all-to-all, and not just dealer to buyside.

Ben Stephens, Instinet

“For example, RFQs can interact with all types of flow including streaming liquidity from electronic liquidity providers, electronic institutional orders and retail brokers,” he added.

Instinet’s RFQ process is fully automated and machine-driven and users will automatically route orders to the RFQ venue if a better price or bigger size can be achieved. BlockMatch is also centrally cleared so counterparties can choose whether to disclose their identity on each message.

“Our market share has been growing,” he added. “Volumes should be boosted by the incoming regulation that prevents systematic internalisers from trading inside tick sizes, meaning that streaming liquidity providers on BlockMatch will then be able to compete in the same or better prices.”

Stephens continued there will also be the potential to use the firm’s RFQ process for ETFs if their trading becomes more automated.

London Stock Exchange

Scott Bradley, head of sales and marketing at London Stock Exchange, told Markets Media that one  of the key benefits of the exchange’s automated RFQ model, launched last year, is that it fits within existing member connectivity and workflows at a time when resources are challenged.

Members can choose whether to remove their anonymity, becoming a named requestor and the exchange will remove, limit price and direction when sending an RFQ. Requestors can also set a time limit for responses to come back.

Once the RFQ window has closed, the London Stock Exchange determines which was the most suitable response and, as appropriate, an execution or whether nothing was done is reported simultaneously to all parties.   An execution audit report can then be produced.

Scott Bradley, London Stock Exchange

“It is designed to sit within the SOR (smart order router) of member firms,” he added. “You cannot afford to bring an offering to market that requires a lot of heavy lifting.”

He continued that London Stock Exchange’s auto-RFQ is on-exchange and centrally cleared through the same choice of CCPs as the central limit order book which reduces counterparty and balance sheet risk.

“Regulations such as CSDR show that central clearing is being encouraged,” said Bradley.

The European Union’s Central Securities Depositories Regulation imposes penalties for trades that fail to settle and so encourages more efficient post-trade procedures.

“Especially in times of challenged markets there has been more interest in sourcing liquidity from member firms further afield,” added Bradley. “Further developments will include specific workflows for ETF trading, combining auto-RFQ functionality with an order book sweep interaction to achieve best outcome whilst maintaining fully automated responses to a RFQ.”


Russell Thornton, trading strategy lead at Iress, said in an email to Markets Media that the financial technology business provides connections to LSE RFQ, ICAP Fusion and around 30 liquidity providers on the UK’s Retail Service Provider (RSP) network. Thornton said RFQs provide an increasingly important mechanism for trading in larger size than available on the markets in a single trade, rather than working orders into the market over time.

He added that clients typically select one or two of the services as each venue has a sweet spot for size, coverage and style of post-trade regime.

Russell Thornton, Iress

“What is key is ensuring that more than one venue is used so that you’re seeing as much of the market as possible,” said Thornton. “This is important not only to see all the liquidity available but also to prove best execution under MiFID II.”

He continued there has been increased demand for RFQ services as order book liquidity has decreased in the current markets.

“It isn’t really possible to predict long-term trends right now but it’s not unlikely that demands for RFQ services will increase as liquidity becomes even more constrained,” said Thornton.

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