2ways to sell a security@ECN #RFQ

BW (bid wanted) is an application connecting sellers-without-offer-price (swop)[1] with bidders of our desk (CB)[2]. BW allows swop to sell their asset quickly. Most invitations (ie IFB) result in trades.

Typically, a swop puts up a Request for quotation (RFQ) aka IFB (Invitation For Bid) “1m of bond123. Please bid by 11am (bid time). Will finalize by 1pm (firm time)”. Before bid time, multiple[3] bidders from a single desk can use BW to submit bids and cancel bids. At bid time, the desk elects and send out a single top bid to the conduit. No cancel-bid allowed afterward. By firm time, seller must accept or, by default, reject all bids. Acceptance usually means trade finalized but the winning trader could get chance for a last-look.

Now a comparison of the IFB model and the neoreo model of *selling* bonds. I think these are the 2 primary modes on wall street.
* IFB is advertising without an offer price. Once our replies (bids) go out, no back-out as swop can execute the trade right away.
* neoreo is advertising with an offer price. Once our offer is published, no back-out, as trade can execute right away. Neoreo maintains the sell position.

Q: how do buyer/seller negotiate?
A: i feel BW and neoreo won’t support it. It’s over phone.

Some conduits (like bloomberg and TMC) are transparent, so bidders can see top x bids for each request.

Retail conduit charges higher commission than other conduits. Commission is part (say, 10%) of the bid price. swop receives the net price.

[1] Swops are usually broker-dealers, buy-side firms like blackrock but can also be individual investors.
[2] desk bidders are typically traders but can also be an autobidder.
[3] The same cusip can be bought by different traders

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Posted in ECN

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