Dealer Banks are financial institutions that serve as market makers, providing liquidity by continuously quoting bid and ask prices for securities or derivatives from their own inventory. They execute trades with clients as principals, facilitating market depth. These entities are central to market operations.
Mechanism
Dealer banks operate sophisticated trading desks equipped with electronic systems that generate prices for various financial instruments, including crypto derivatives and spot assets. They manage significant capital, holding positions to satisfy client demand and capitalize on bid-ask spreads and market price movements. Their infrastructure supports high-volume transactions.
Methodology
Their strategic approach involves meticulous inventory management, systematic risk hedging, and providing price discovery through bilateral request for quote (RFQ) platforms or electronic communication networks. Within crypto, they extend market-making capabilities to digital assets, offering institutional clients access to liquidity and options products, while navigating distinct regulatory and technological landscapes.
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