Requotes

What Are Requotes?

Requotes occur in financial trading, primarily within the Foreign Exchange Market, when a brokerage is unable to execute a client's order at the initially requested price. Instead, the broker offers a new, updated price, and the trader is given a brief window to accept or reject this revised offer¹³. This phenomenon is a direct consequence of the rapid price fluctuations common in fast-moving or thinly traded markets. Requotes fall under the broader category of trading execution issues, impacting the precise fulfillment of trade orders.

When a trader places an order, particularly a market order, they expect it to be filled at the displayed price. However, the time delay, even if only a fraction of a second, between the moment an order is placed and when it reaches the forex broker for order execution can lead to the original price no longer being available¹². This situation necessitates a requote, essentially a re-confirmation from the trader at the prevailing market rate.

History and Origin

The concept of requotes is intrinsically linked to the evolution of electronic trading in financial markets, particularly the decentralized Foreign Exchange Market. In the pre-electronic era, currency trades were largely conducted manually, often over the phone or through personal interactions between banks and financial institutions¹¹. Price discovery and execution were slower processes, and the immediacy that could lead to a requote as understood today was less prevalent.

With the advent of electronic trading systems in the 1970s and 1980s, the speed and accessibility of the forex market dramatically increased¹⁰. Platforms like the Reuters Dealing System allowed banks to trade currencies electronically, replacing slower telex-based communications. The subsequent rise of online retail trading platforms in the late 1990s and early 2000s, along with Electronic Communication Networks (ECNs), further accelerated trade execution⁹. This increased speed, while beneficial for market efficiency, also highlighted the challenges of executing orders in milliseconds, especially during periods of high market volatility or low liquidity. Requotes became a more common experience for traders as technology exposed the real-time discrepancies between requested and available prices.

Key Takeaways

• Requotes occur when a broker cannot execute a trade at the original price and offers a new one.
• They are most common in fast-moving markets, especially in Forex Trading.
• Key causes include high market volatility, low liquidity, and technical delays⁸.
• Traders can usually accept the new price, reject it, or cancel the trade.
• Requotes can lead to missed opportunities or sub-optimal trade entries/exits.

Interpreting the Requote

A requote serves as a notification that the market price has shifted from what was initially displayed or requested. From the trader's perspective, a requote typically indicates that the price has moved unfavorably, making the original desired trade less appealing or unprofitable. For example, if a trader wants to buy a currency pair at a specific price, a requote would likely offer a higher buying price, or if selling, a lower selling price, impacting the potential profit margin⁷.

Brokers often implement different order execution models. In an "instant execution" model, a requote is a common mechanism to inform the trader of a price change and seek re-confirmation for execution at the new price. In contrast, "market execution" models aim to fill the order at the best available price, even if it deviates slightly from the requested price, often resulting in slippage rather than a requote⁶. Understanding the broker's execution policy and market conditions is crucial for interpreting why a requote has occurred.

Hypothetical Example

Consider a forex trader, Alice, who wants to buy the EUR/USD currency pair. The current displayed price on her trading platform is 1.0850. Alice places a market order to buy 1 standard lot of EUR/USD at this price.

However, just as she clicks "buy," a major economic news announcement is released, causing a sudden spike in market volatility. Before her order can be fully processed by her forex broker, the price of EUR/USD jumps.

Instead of immediate execution, Alice's platform displays a requote message: "New Price: 1.0855. Accept or Cancel?" This indicates that the original price of 1.0850 is no longer available, and the broker is offering to execute the trade at the new, higher price of 1.0855. Alice now has to decide whether to accept the higher price, which would reduce her potential profit, or cancel the trade, potentially missing the move altogether. If she accepts, her trade is opened at 1.0855. If she declines or does not respond within the brief time limit, the order is cancelled.

Practical Applications

Requotes are a tangible aspect of trading, especially for individuals operating in the highly liquid but often volatile Foreign Exchange Market. They illustrate the real-time dynamics of price discovery and the challenges of synchronous order execution across a global, decentralized market.

• Risk Management: For traders, understanding requotes is vital for managing execution risk. While unavoidable in certain market conditions, a high frequency of requotes from a particular brokerage could indicate issues with their technology, liquidity providers, or execution model.
• Regulatory Scrutiny: Regulators in major financial hubs pay close attention to practices that can disadvantage traders, including issues related to execution quality. For instance, the Financial Conduct Authority (FCA) in the UK emphasizes "best execution," requiring forex brokers to take all reasonable steps to obtain the best possible result for their clients when executing orders⁵. Similarly, the European Securities and Markets Authority (ESMA) through its MiFID II framework also mandates stringent "best execution" requirements, aiming to ensure transparency and fairness in trade execution across various financial instruments⁴. These regulations indirectly address issues that could lead to an excessive or unfair number of requotes.
• Trading Strategy Adaptation: Traders employing strategies like scalping or high-frequency trading, which rely on tight bid-ask spreads and immediate execution, must account for the possibility of requotes impacting their profitability. They might adjust their strategies to avoid trading during periods of peak market volatility or news releases.

Limitations and Criticisms

While requotes can be a legitimate consequence of rapid market movements, they are also a point of frequent criticism from traders. A primary concern is that requotes often occur when the price moves unfavorably for the trader, leading to the perception of a conflict of interest with the brokerage³. This perception arises because if the price moves favorably, the trade might be executed without a requote (or with positive slippage in market execution models), while an unfavorable move triggers the requote.

Another limitation is the disruptive impact on trading flow. Constant requotes can be frustrating, especially for traders trying to enter or exit positions quickly. This can lead to missed opportunities or prevent the effective use of automated trading systems. While some trading platforms allow traders to set a "maximum deviation" or "tolerance" for price changes to reduce the frequency of requotes, large market moves can still override these settings².

For brokers employing an "instant execution" model, requotes are a built-in feature to prevent negative slippage for the client at the cost of guaranteed execution at the original price. However, the onus is on the forex broker to demonstrate fair practices and robust technical infrastructure to minimize requotes where possible and to comply with regulatory best execution obligations. Regulatory bodies, such as the FCA and ESMA, continuously review and update rules to enhance investor protection and ensure fair order execution within fragmented markets¹.

Requotes vs. Slippage

Requotes and slippage are both phenomena related to the actual execution price of a trade differing from the requested or displayed price, but they manifest differently and are tied to different order execution models.

While both occur due to rapid market volatility or insufficient liquidity, the key distinction lies in the control afforded to the trader. A requote gives the trader the choice to proceed, whereas slippage represents an automatic adjustment to the execution price.

FAQs

Why do I get requotes so often?

Frequent requotes can be caused by several factors, including high market volatility (e.g., during major news events), low liquidity in the market, or technical issues with your forex broker's trading platform or your internet connection.

Can requotes be avoided?

While it's difficult to eliminate requotes entirely in fast markets, you can minimize them. Strategies include using limit orders instead of market orders, trading with brokers offering "market execution" (which may result in slippage instead), improving your internet connection, or avoiding trading during highly volatile news releases. Some platforms allow setting a maximum acceptable price deviation.

Are requotes good or bad?

Requotes are generally considered a nuisance by traders because they often result in a less favorable price than initially requested, or cause a delay that leads to a missed opportunity. However, from a broker's perspective using an "instant execution" model, they serve to protect the trader from receiving an unexpectedly worse price without confirmation.

How are requotes different from slippage?

The main difference is that a requote gives you a choice: accept the new price or cancel the trade. Slippage, on the other hand, occurs when your order is simply executed at the next available price, which may be higher or lower than your requested price, without explicit re-confirmation from you.

Do all brokers have requotes?

Not all brokers have requotes, as it depends on their order execution model. Brokers using "Instant Execution" models are more likely to issue requotes. Brokers utilizing "Market Execution" or Electronic Communication Network (ECN) models typically do not issue requotes but instead fill orders at the best available market price, which may involve slippage.