A protocol where a trader asks selected dealers or market makers to quote a specific size, then trades on the best response.
RFQ is the norm wherever a central order book is thin: bonds, swaps, ETFs in size, and multi-leg options. Instead of hunting for resting liquidity, you invite it.
Information leakage is the cost. Every dealer you ask learns what you want to do, so traders limit the panel and sometimes disguise direction by asking for a two-way price.
Example: you need 100,000 shares of a thinly traded ETF quoted 40.10 / 40.30 in 2,000 lots. Four market makers respond to an RFQ at 40.21, 40.23, 40.19 and 40.26. You trade 100,000 at 40.19 — inside the screen spread, in one print, without a two-hour algo.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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