Contacting brokers

Calling brokers for prices is extremely helpful for developing junior staff and allows
them to feel much more confident with specifying market parameters such as
volatility, bid offer spreads, etc. This confidence is part of the overall on the job
training regime and helps overall confidence of the markets and products. Note that
once the rapport is developed with target brokers over the phone, this method can
be more efficiently implemented, first by email and then by fax.
Due to the nature of the broker network it is important to consider rotating brokers
and to average several quotes is best practice. However, the practical nature and
justification must be considered. When calling a broker for a quote, the broker will
ask which firm you are from. When specifying the firm there are two risks. The first
is that you are giving the position of the firm to the market. This is an issue in less
liquid markets. For volatilities it can slightly disguised by asking for a range of
strikes. The second risk is that the broker has a relationship with your firm. Due to
the nature of the market, the price that comes back can be informally from the
brokers of the firm. More brokers called can reduce this risk at the trade off cost of
giving away the position to more players in the market.