What Is ‘Information Leakage’ and How Is It a Risk in the RFQ Process?

Information leakage occurs when the fact that a large trade is being sought becomes known to the market before execution, allowing other traders to front-run the order. In an RFQ, the risk is that the solicited liquidity providers may use the request for quote information to trade in the open market ahead of the client's execution.

This can result in a worse execution price for the institutional trader. RFQ platforms employ controls to limit this risk.