Dealer Selection Criteria refer to the quantifiable and qualitative standards institutions use to evaluate and choose liquidity providers or counterparties for crypto trading activities, especially within an RFQ framework or for institutional options. These criteria aim to optimize execution quality, manage risk, and secure favorable trading terms.
Mechanism
The mechanism involves a structured assessment process, comparing dealers across various metrics. These metrics include bid-ask spread competitiveness, quoted size capacity, execution speed, historical fill rates, and post-trade support. Technological capabilities, regulatory compliance status, and reputation within the crypto ecosystem also factor into the evaluation.
Methodology
The methodology for applying dealer selection criteria typically establishes a weighted scoring system based on the institution’s trading objectives and risk tolerance. Regular performance reviews, benchmarking against peer groups, and ongoing due diligence verify that selected dealers consistently meet expectations. The objective is to construct a diversified panel of liquidity providers that collectively minimize trading costs and optimize access to liquidity.
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