COVID-19 boosts RFQ demand – Connamara CEO

By Wendy Lisney

The closure of trading floors amid COVID-19 has boosted demand for request for quote (RFQ) functionality to replicate the floor experience, Chicago tech firm Connamara has said.

“The floor was essentially an RFQ model for complex strategies and products, be it options strategies or swaps or strips,” Jim Downs, Connamara’s chief executive officer, told Global Investor on Thursday.

“There can be some negotiation between the individuals making the markets and the requests for quotes, so RFQ actually more closely resembles how complex strategies are traded on the floor than it does a central limit order book (CLOB).”

The pandemic has also forced people to become more comfortable with trading over the screen, Downs said, even for complex products, which is adding to the demand for RFQ functionality. “People are understanding it more,” he said, “how it works, how it can benefit them for tradeable instruments that are not cookie-cutter.”

Connamara has responded to this demand by adding RFQ functionality to its EP3 platform for exchanges and marketplaces, which it expects to be live by the end of June. “RFQ was on our roadmap before COVID,” Downs said, “but the demand we got…was enough for us to make the leap and go forward.”

According to Downs, the new functionality will add products in opaque markets where trades are complex or illiquid, including swap execution facility-listed instruments and over the counter swaps such as energy, rates, foreign exchange, credit, equities and crypto.

“One of things we’ve always done with standardized CLOB products and projects is to open up new, opaque markets,” Downs said. “RFQ opens up a whole new realm, where we hope to bring further price transparency and price discovery. The potential is huge and derivatives are just the tip of the iceberg.”

COVID-19 has highlighted a number of technology issues in recent months. In May, Itiviti said banks face a generational overhaul of legacy tech to tackle capacity and remote working issues, while TraditionDATA has spotted growing demand for historic data as firms seek to learn lessons from volatility and elevated trading volumes.

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