Request for quote explained

A Request for Quote (RfQ) is a financial term for certain way to ask a bank for an offer of a given financial instrument from a bank, made available by so-called Approved Publication Arrangement (APA) by the stock markets itself or by Financial data vendors as required in Europe by MiFID II and in effect since January 2018.^[1] A RFQ contains at least the ISIN to uniquely identify the financial product, the type (buy/ sell), the amount, a currency, and the volume (

\hbox{amount} x \hbox{market price} in given currency).

Background

In the wake of the 2007-09 financial crisis there was an initiative to create more pre-trade transparency, for which it is essential to know who is requesting which financial product.^[2]

Article 1(2) of the Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 (which supplements Regulation (EU) No 600/2014 of the European Parliament and of the council on markets in financial instruments) defines:^[3]

This essentially means, that everybody buying or selling stocks, bonds, foreign exchange, commodities or exchange-traded funds (ETFs) will (automatically) generate an RfQ before the trade is settled.

External links

The MiFID II and APA data is distributed e.g. by

• https://www.bloomberg.com/professional/product/apa/
• https://www.mds.deutsche-boerse.com/mds-de/data-services/marktdaten-in-echtzeit/deutsche-boerse-mifid-ii-apa-service
• https://www.refinitiv.com/en/mifid/solutions-and-services/apa-and-publication-services

Further reading:

• https://www.cnbc.com/2017/12/15/mifid-2-all-you-need-to-know.html ― a concise summary on the topic, understandable for laymen.

Notes and References

1. Service and Technical Description - Request for Quote (RfQ) . London Stock Exchange . 23 Oct 2018 . Version 1.1 . 8 July 2019.
2. Web site: Bollenbacher . George . Through a Glass Darkly – Transparency for Non-Equities Under MiFID II/MIFIR . OTC Space . 8 July 2019.
3. Web site: Request-for-quote (RFQ) system . www.emissions-euets.com . 8 July 2019.