Finding and balancing the “Sweet Spot” on an RFQ Panel

Our latest research attempts to tackle the long standing question of ‘how many participants should I have on my RFQ panel’. Not an easy question to answer, and for fear of sounding like a politician, the answer is ‘it depends’. On what? Well, it generally depends on how you trade and what your objectives are for example, if you trade full size and don’t tend to build into a position over a period of time, then market impact may not be a key priority and you may simply want to focus on minimising spread costs. If, however, you execute in slices, building into positions, then impact can have a significant impact on the goal of achieving best execution.

We explore a causal approach to answering the question, trying to balance the ‘sweet spot’ of minimising the spread paid, whilst at the same time, minimising the potential information leakage and subsequent market impact. Please email if you are a BestX client and would like to receive a copy of the research.