The Fill-to-Quote Ratio, in the context of crypto request for quote (RFQ) systems and institutional trading, is a metric that quantifies the proportion of quoted trade volume that is actually executed or filled by a liquidity provider. This ratio serves as a key performance indicator (KPI) for evaluating the effectiveness and reliability of liquidity provision and quote aggressiveness. A higher ratio indicates more dependable and executable quotes, which is crucial for institutional participants seeking reliable trade execution.
Mechanism
This ratio is calculated by dividing the total volume of trades filled against a liquidity provider’s quotes by the total volume of quotes issued by that provider over a specified period. For example, if a market maker quotes 100 BTC but only 70 BTC are filled, the ratio is 70%. The mechanism requires precise logging of all issued quotes and subsequent executions, enabling analytical systems to compute this metric. Factors such as market volatility, quote duration, and execution latency directly impact this ratio.
Methodology
Improving the Fill-to-Quote Ratio involves a strategic methodology focused on optimizing pricing algorithms, managing inventory risk, and enhancing execution speed. This includes refining models that account for market impact and slippage, ensuring sufficient capital allocation to support quoted sizes, and reducing latency in quote generation and response. Furthermore, a diligent approach to data analysis and backtesting helps identify patterns in quote performance and allows for iterative adjustments to quoting strategies to maximize fill rates while maintaining profitability.
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