A Request for Quote (RFQ) is a way for traders to get electronic quotes on multi-leg options strategies. It is an electronic message that is sent to all CME Globex market participants that are expressing interest in a strategy or instrument. A similar concept has been used for years on the trading floor, in which a trader shouts out across the pit looking for a market. RFQs are instant, anonymous, and canvases all CME Globex participants for a market.
Once submitted, a unique and tradeable instrument is created on CME Globex and market participants respond with bids and offers.
Example
If you’re bullish on corn, you could submit an RFQ for a corn bull call-spread. You would build the spread in your options trading platform and submit an RFQ. Participants will respond with live bid-ask prices. You can then execute based on those prices, counter with your own price, or you could do nothing at all.
Benefits of RFQs
RFQs eliminate leg risk as multi-leg strategies are executed as a single instrument. They allow efficient price discovery and enable you to generate interest on a specific strike when liquidity is low. Additionally, they allow customizable strategies across all asset classes.
RFQ’s are customized, transparent, and anonymous – a useful tool at the trader’s disposal. For more information or to see a demonstration, visit cmegroup.com/rfq.
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