# How Can an Institution Quantitatively Measure Price Improvement within a Governed RFQ System? ▴ Question

**Published:** 2025-07-30
**Categories:** Question

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![A disaggregated institutional-grade digital asset derivatives module, off-white and grey, features a precise brass-ringed aperture. It visualizes an RFQ protocol interface, enabling high-fidelity execution, managing counterparty risk, and optimizing price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-modular-execution-intelligence-system.jpg)

![Abstract forms on dark, a sphere balanced by intersecting planes. This signifies high-fidelity execution for institutional digital asset derivatives, embodying RFQ protocols and price discovery within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-platform-microstructure-execution-prime-os.jpg)

## Concept

An institution’s ability to quantify [price improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) within its bilateral price discovery protocols is the primary diagnostic for its execution architecture. The process moves beyond the simple calculation of savings; it represents a high-resolution measurement of the system’s capacity to source liquidity efficiently and discreetly. At its core, the measurement is an objective function that evaluates the performance of a governed Request for Quote (RFQ) system against a valid counterfactual price. This counterfactual is a theoretical [execution price](https://prime.greeks.live/area/execution-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that would have been achieved under a different set of conditions, establishing a neutral reference point for analysis. 

The entire exercise rests on establishing this benchmark. Without a methodologically sound baseline, any resulting figure is arbitrary. The benchmark serves as the “sea level” from which all execution altitudes are measured, allowing for meaningful, relative comparisons across different dealers, assets, and market conditions.

Therefore, the initial and most critical step is the design and validation of this counterfactual pricing model. This model internalizes factors such as prevailing market rates, volatility, and the implicit costs of information leakage inherent in any request for a price.

> A robust price improvement metric is fundamentally a measure of a trading system’s information and liquidity sourcing advantage.

This perspective transforms the measurement from a retrospective accounting task into a forward-looking tool for system calibration. It provides actionable intelligence. A consistently positive price improvement delta indicates that the [RFQ protocol](https://prime.greeks.live/area/rfq-protocol/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is successfully accessing liquidity pools and dealer axes that are superior to the generalized, publicly available market.

A negative or inconsistent delta signals a deficiency in the system’s configuration, its selection of counterparties, or its interaction with the broader market structure. The quantification is the feedback loop that governs the evolution of the execution system itself.

![Interconnected translucent rings with glowing internal mechanisms symbolize an RFQ protocol engine. This Principal's Operational Framework ensures High-Fidelity Execution and precise Price Discovery for Institutional Digital Asset Derivatives, optimizing Market Microstructure and Capital Efficiency via Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-high-fidelity-execution.jpg)

![Angular metallic structures precisely intersect translucent teal planes against a dark backdrop. This embodies an institutional-grade Digital Asset Derivatives platform's market microstructure, signifying high-fidelity execution via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-high-fidelity-execution-system-architecture.jpg)

## Strategy

Developing a strategy for measuring price improvement requires the construction of a multi-layered benchmark framework. A single reference point is insufficient to capture the dynamics of institutional trading. The architecture of this framework should incorporate both external market data and internal execution parameters to produce a holistic view of performance. This approach provides a robust defense against statistical anomalies and offers deeper insight into the sources of [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

![A polished disc with a central green RFQ engine for institutional digital asset derivatives. Radiating lines symbolize high-fidelity execution paths, atomic settlement flows, and market microstructure dynamics, enabling price discovery and liquidity aggregation within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-core-for-optimal-execution.jpg)

## Selecting the Appropriate Benchmarks

The choice of benchmark directly influences the interpretation of price improvement. An institution must select and combine several benchmarks to create a composite view of performance. Each benchmark possesses unique characteristics and is sensitive to different market dynamics.

The following table outlines primary benchmarks and their strategic applications in an RFQ context:

| Benchmark Type | Description | Strategic Application |
| --- | --- | --- |
| National Best Bid and Offer (NBBO) | The best available bid and ask prices displayed across all public exchanges. It represents the most visible measure of the market at a specific moment. | Provides a fundamental, compliance-oriented measure of price improvement. Executing inside the NBBO is the baseline expectation for quality. |
| Midpoint Price | The price exactly between the NBBO bid and ask. It is often used as a target for price-improving algorithms and dark pool executions. | Measures the ability to capture the spread, a direct saving for the institution. A key metric for assessing performance in less volatile, liquid assets. |
| Volume-Weighted Average Price (VWAP) | The average price of a security over a specific time period, weighted by volume. It reflects the price paid by the overall market. | Assesses execution performance relative to the market’s trading activity throughout the day. Useful for large orders executed over time. |
| Arrival Price | The market price at the moment the decision to trade was made and the order was sent to the RFQ system. | Measures the full cost of implementation, including the market impact and signaling risk generated by the RFQ process itself. |

![A sleek blue and white mechanism with a focused lens symbolizes Pre-Trade Analytics for Digital Asset Derivatives. A glowing turquoise sphere represents a Block Trade within a Liquidity Pool, demonstrating High-Fidelity Execution via RFQ protocol for Price Discovery in Dark Pool Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-execution-system-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

## How Does RFQ Competitiveness Affect the Outcome?

The structural design of the bilateral price discovery process is a primary driver of price improvement. The number of dealers invited to respond to a quote solicitation protocol directly influences the level of competition. A broader request to a curated set of liquidity providers can tighten spreads and improve the final execution price.

Research indicates that increasing the number of bidders directly improves prices, while also indirectly forcing existing bidders to become more competitive. The system must be calibrated to balance the benefits of wider competition against the risk of information leakage that can occur when an RFQ is sent too broadly.

> The strategic objective is to create a competitive auction environment within a secure, governed protocol.

An institution’s strategy should involve systematically tracking the relationship between the number of dealers queried and the resulting price improvement. This data allows for the optimization of the RFQ process on a per-asset-class or even per-security basis. The goal is to identify the optimal number of counterparties that maximizes competitive tension without incurring adverse selection costs.

![A gold-hued precision instrument with a dark, sharp interface engages a complex circuit board, symbolizing high-fidelity execution within institutional market microstructure. This visual metaphor represents a sophisticated RFQ protocol facilitating private quotation and atomic settlement for digital asset derivatives, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-precision-execution-engine-optimizing-digital-asset-derivatives-rfq-protocols-within-market-microstructure.jpg)

## The Role of the Effective Quoted Spread

A more sophisticated strategic metric is the Effective/Quoted Spread (EFQ). This ratio compares the [effective spread](https://prime.greeks.live/area/effective-spread/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (the price paid relative to the midpoint) to the quoted spread (the [NBBO](https://prime.greeks.live/area/nbbo/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)). A lower EFQ percentage signifies greater price improvement.

This metric normalizes price improvement across securities with different spread characteristics, allowing for more accurate comparisons of execution quality across a diverse portfolio. Tracking EFQ over time for each counterparty provides a powerful quantitative basis for optimizing dealer selection and order routing decisions.

![Parallel marked channels depict granular market microstructure across diverse institutional liquidity pools. A glowing cyan ring highlights an active Request for Quote RFQ for precise price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution-3.jpg)

![A spherical Liquidity Pool is bisected by a metallic diagonal bar, symbolizing an RFQ Protocol and its Market Microstructure. Imperfections on the bar represent Slippage challenges in High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-optimization-within-principals-market-microstructure-framework.jpg)

## Execution

The execution of a price improvement measurement program requires a disciplined, data-driven process. It translates strategic objectives into a concrete operational workflow, where every RFQ transaction is captured, analyzed, and integrated into a performance database. This system provides the high-fidelity data necessary for continuous optimization of the trading function.

![Intersecting opaque and luminous teal structures symbolize converging RFQ protocols for multi-leg spread execution. Surface droplets denote market microstructure granularity and slippage](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocols-for-digital-asset-derivatives-high-fidelity-execution.jpg)

## Core Quantitative Metrics

At the operational level, several key metrics must be calculated for every execution. These metrics form the building blocks of the entire [transaction cost analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (TCA) framework for RFQs.

- **Price Improvement per Share/Unit** ▴ This is the difference between the benchmark price (e.g. NBBO) and the execution price. For a buy order, a positive value indicates the execution price was lower than the benchmark. For a sell order, a positive value indicates the execution price was higher. 

- **Total Price Improvement Amount** ▴ Calculated as the price improvement per share multiplied by the total number of shares executed. This provides a clear dollar value of the savings achieved on a given trade. 

- **Price Improvement Percentage** ▴ This measures the percentage of orders that were executed at a price better than the relevant benchmark. It provides a measure of the consistency of price improvement. 

- **[Spread Capture](https://prime.greeks.live/area/spread-capture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Percentage** ▴ This metric quantifies what portion of the bid-ask spread was captured by the trade. A 100% capture means a buy order executed at the bid or a sell order at the ask. A 50% capture indicates execution at the midpoint.

![A precise mechanical instrument with intersecting transparent and opaque hands, representing the intricate market microstructure of institutional digital asset derivatives. This visual metaphor highlights dynamic price discovery and bid-ask spread dynamics within RFQ protocols, emphasizing high-fidelity execution and latent liquidity through a robust Prime RFQ for atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineering-driving-institutional-digital-asset-derivatives-execution-across-advanced-rfq-protocols-and-prime-brokerage-frameworks.jpg)

## Building the Measurement Workflow

An institution must implement a systematic process to ensure that data is captured and analyzed consistently. This workflow is the engine of the measurement system.

- **Data Capture** ▴ At the time of the RFQ, the system must snapshot all relevant benchmark prices (NBBO, Midpoint, [Arrival Price](https://prime.greeks.live/area/arrival-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) and the state of the order book.

- **Execution Record** ▴ The final execution price, time, and responding dealer for the winning quote are recorded. The prices from all losing quotes are also logged to analyze the competitiveness of the auction.

- **Metric Calculation** ▴ The captured data is processed immediately post-trade to calculate the core price improvement metrics. This calculation should be automated to ensure accuracy and timeliness.

- **Attribution Analysis** ▴ The system attributes the price improvement to specific factors. For instance, was the improvement due to favorable routing, accessing a specific dealer’s unique liquidity, or superior timing? 

- **Performance Review** ▴ The aggregated data is reviewed on a regular basis (daily, weekly, monthly) to assess the performance of the RFQ system, individual dealers, and different trading strategies.

![Translucent and opaque geometric planes radiate from a central nexus, symbolizing layered liquidity and multi-leg spread execution via an institutional RFQ protocol. This represents high-fidelity price discovery for digital asset derivatives, showcasing optimal capital efficiency within a robust Prime RFQ framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-layer.jpg)

## What Is the Impact of Latency and Data Quality?

The precision of the entire measurement framework depends on the quality and timeliness of the market data used for benchmarking. Latency in data feeds can lead to stale benchmark prices, creating inaccuracies in the calculation of price improvement. An institution must invest in high-quality, low-latency data feeds to ensure that the benchmarks used are a true reflection of the market at the exact moment of execution. The system’s internal clocks must be synchronized with a universal time source to guarantee the integrity of timestamps for all data points.

The following table demonstrates a simplified calculation for a single trade, highlighting the importance of accurate data.

| Parameter | Value | Source |
| --- | --- | --- |
| Order Type | Buy 10,000 Shares | Order Management System |
| NBBO at Execution | $100.00 (Bid) / $100.02 (Ask) | Market Data Feed |
| Midpoint Price | $100.01 | Calculated |
| Execution Price | $100.005 | Winning RFQ Response |
| Price Improvement vs. Ask | $0.015 per share | ($100.02 – $100.005) |
| Total Improvement Amount | $150.00 | ($0.015 10,000) |
| Spread Capture | 75% | (($100.02 – $100.005) / $0.02) |

![A light sphere, representing a Principal's digital asset, is integrated into an angular blue RFQ protocol framework. Sharp fins symbolize high-fidelity execution and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/principals-core-asset-rfq-protocol-framework-for-digital-derivatives.jpg)

## References

- Barbier, G. et al. “Quantifying Price Improvement in Order Flow Auctions.” arXiv preprint arXiv:2311.00173, 2023.

- Bessembinder, H. and K. Venkataraman. “Does the Combination of Anonymity and Execution Options Benefit Investors?” Journal of Financial and Quantitative Analysis, vol. 55, no. 1, 2020, pp. 1-32.

- O’Hara, M. and Y. Yao. “The new shape of liquidity ▴ The role of market structure in US corporate bond trading.” Swiss Finance Institute Research Paper Series, no. 21-43, 2021.

- Lehalle, C. and E. Gouriou. “Liquidity Dynamics in RFQ Markets and Impact on Pricing.” arXiv preprint arXiv:2406.13437, 2024.

- Easley, D. N. M. Kiefer, and M. O’Hara. “Cream-Skimming or Profit-Sharing? The Curious Role of Purchased Order Flow.” The Journal of Finance, vol. 51, no. 3, 1996, pp. 811-33.

- Harris, L. Trading and Exchanges ▴ Market Microstructure for Practitioners. Oxford University Press, 2003.

- Madhavan, A. “Market Microstructure ▴ A Survey.” Journal of Financial Markets, vol. 3, no. 3, 2000, pp. 205-58.

![Abstract, sleek components, a dark circular disk and intersecting translucent blade, represent the precise Market Microstructure of an Institutional Digital Asset Derivatives RFQ engine. It embodies High-Fidelity Execution, Algorithmic Trading, and optimized Price Discovery within a robust Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/principals-rfq-system-for-digital-asset-derivatives-execution.jpg)

## Reflection

The framework for quantifying price improvement is a living system. Its value is realized through its continuous application and evolution. The metrics and processes detailed here provide the schematics for building a superior execution intelligence layer. The ultimate objective is to create a feedback loop where every transaction informs the next, progressively refining the institution’s interaction with the market.

Consider how your current operational protocols capture, analyze, and act upon this critical execution data. The precision of your measurement capability directly defines the ceiling of your potential performance.

![Reflective dark, beige, and teal geometric planes converge at a precise central nexus. This embodies RFQ aggregation for institutional digital asset derivatives, driving price discovery, high-fidelity execution, capital efficiency, algorithmic liquidity, and market microstructure via Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-hub-for-precise-liquidity.jpg)

## Glossary

<a href="https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A stylized rendering illustrates a robust RFQ protocol within an institutional market microstructure, depicting high-fidelity execution of digital asset derivatives. A transparent mechanism channels a precise order, symbolizing efficient price discovery and atomic settlement for block trades via a prime brokerage system](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-execution-digital-asset-derivatives-options-high-fidelity-trading.jpg)

## Price Improvement

Meaning ▴ Price Improvement, within the context of institutional crypto trading and Request for Quote (RFQ) systems, refers to the execution of an order at a price more favorable than the prevailing National Best Bid and Offer (NBBO) or the initially quoted price. </a><a href="https://prime.greeks.live/area/execution-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision mechanism with a central circular core and a linear element extending to a sharp tip, encased in translucent material. This symbolizes an institutional RFQ protocol's market microstructure, enabling high-fidelity execution and price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-execution-engine-microstructure-facilitating-optimal-price-discovery-and-best-execution.jpg)

## Execution Price

Meaning ▴ Execution Price refers to the definitive price at which a trade, whether involving a spot cryptocurrency or a derivative contract, is actually completed and settled on a trading venue. </a><a href="https://prime.greeks.live/area/rfq-protocol/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central circular element, vertically split into light and dark hemispheres, frames a metallic, four-pronged hub. Two sleek, grey cylindrical structures diagonally intersect behind it](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-for-digital-asset-derivatives-execution-1.jpg)

## Rfq Protocol

Meaning ▴ An RFQ Protocol, or Request for Quote Protocol, defines a standardized set of rules and communication procedures governing the electronic exchange of price inquiries and subsequent responses between market participants in a trading environment. </a><a href="https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek metallic device with a central translucent sphere and dual sharp probes. This symbolizes an institutional-grade intelligence layer, driving high-fidelity execution for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-precision.jpg)

## Execution Quality

Meaning ▴ Execution quality, within the framework of crypto investing and institutional options trading, refers to the overall effectiveness and favorability of how a trade order is filled. </a><a href="https://prime.greeks.live/area/effective-spread/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A detailed view of an institutional-grade Digital Asset Derivatives trading interface, featuring a central liquidity pool visualization through a clear, tinted disc. Subtle market microstructure elements are visible, suggesting real-time price discovery and order book dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-system-microstructure-display.jpg)

## Effective Spread

Meaning ▴ The Effective Spread, within the context of crypto trading and institutional Request for Quote (RFQ) systems, serves as a comprehensive metric that quantifies the true economic cost of executing a trade, meticulously accounting for both the observable bid-ask spread and any price improvement or degradation encountered during the actual transaction. </a><a href="https://prime.greeks.live/area/nbbo/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Clear sphere, precise metallic probe, reflective platform, blue internal light. This symbolizes RFQ protocol for high-fidelity execution of digital asset derivatives, optimizing price discovery within market microstructure, leveraging dark liquidity for atomic settlement and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-precision-execution-1.jpg)

## Nbbo

Meaning ▴ NBBO, or National Best Bid and Offer, represents the highest bid price and the lowest offer price available across all competing public exchanges for a given security. </a><a href="https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek metallic system component with intersecting translucent fins, symbolizing multi-leg spread execution for institutional grade digital asset derivatives. It enables high-fidelity execution and price discovery via RFQ protocols, optimizing market microstructure and gamma exposure for capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-system-rfq-protocols.jpg)

## Transaction Cost Analysis

Meaning ▴ Transaction Cost Analysis (TCA), in the context of cryptocurrency trading, is the systematic process of quantifying and evaluating all explicit and implicit costs incurred during the execution of digital asset trades. </a><a href="https://prime.greeks.live/area/spread-capture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract composition features two intersecting, sharp-edged planes—one dark, one light—representing distinct liquidity pools or multi-leg spreads. Translucent spherical elements, symbolizing digital asset derivatives and price discovery, balance on this intersection, reflecting complex market microstructure and optimal RFQ protocol execution](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivatives-rfq-execution-market-microstructure.jpg)

## Spread Capture

Meaning ▴ Spread Capture, a fundamental objective in crypto market making and institutional trading, refers to the strategic process of profiting from the bid-ask spread ▴ the differential between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for a digital asset. </a><a href="https://prime.greeks.live/area/arrival-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated mechanism depicting the high-fidelity execution of institutional digital asset derivatives. It visualizes RFQ protocol efficiency, real-time liquidity aggregation, and atomic settlement within a prime brokerage framework, optimizing market microstructure for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-execution-liquidity-aggregation-system.jpg)

## Arrival Price

Meaning ▴ Arrival Price denotes the market price of a cryptocurrency or crypto derivative at the precise moment an institutional trading order is initiated within a firm's order management system, serving as a critical benchmark for evaluating subsequent trade execution performance. </a>

**Tags:** [Spread Capture](https://options.greeks.live/area/spread-capture/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [Counterfactual Benchmark](https://options.greeks.live/area/counterfactual-benchmark/), [Arrival Price](https://options.greeks.live/area/arrival-price/), [Execution Quality](https://options.greeks.live/area/execution-quality/), [Liquidity Sourcing](https://options.greeks.live/area/liquidity-sourcing/)	

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An institution quantitatively differentiates execution strategies by architecting a unified TCA framework to measure their distinct impacts.

- 
### [What Are the Primary Differences in Quantifying Execution Quality between an RFQ and a Central Limit Order Book?](https://options.greeks.live/question/what-are-the-primary-differences-in-quantifying-execution-quality-between-an-rfq-and-a-central-limit-order-book/)
![Intersecting translucent planes and a central financial instrument depict RFQ protocol negotiation for block trade execution. Glowing rings emphasize price discovery and liquidity aggregation within market microstructure. This visualizes high-fidelity execution for digital asset derivatives on a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-orchestration-for-high-fidelity-execution-across-prime-os.jpg)

Quantifying execution quality contrasts measuring public market impact on a CLOB with evaluating private negotiation value in an RFQ.

---

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                "text": "The structural design of the bilateral price discovery process is a primary driver of price improvement. The number of dealers invited to respond to a quote solicitation protocol directly influences the level of competition. A broader request to a curated set of liquidity providers can tighten spreads and improve the final execution price. Research indicates that increasing the number of bidders directly improves prices, while also indirectly forcing existing bidders to become more competitive. The system must be calibrated to balance the benefits of wider competition against the risk of information leakage that can occur when an RFQ is sent too broadly."
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---

**Original URL:** https://options.greeks.live/question/how-can-an-institution-quantitatively-measure-price-improvement-within-a-governed-rfq-system/
