A Guaranteed Trade is a type of transaction in financial markets, particularly in institutional crypto Request for Quote (RFQ) contexts, where the execution of an order at a specified price or within a defined price range is assured by a liquidity provider. Its purpose is to eliminate execution risk and price slippage for the requesting party.
Mechanism
In a guaranteed trade scenario, a market maker or dealer commits to a firm quote for a specific volume, often for crypto assets or options. Once the counterparty accepts this quote, the transaction is executed at precisely the agreed-upon terms, regardless of subsequent short-term market fluctuations. This mechanism shifts the price risk from the client to the liquidity provider, who manages this exposure through hedging or internal risk management systems.
Methodology
The strategic approach for clients involves securing execution certainty for large block orders or sensitive positions, which is critical in illiquid or volatile crypto markets. It applies principles of principal trading and bilateral agreement, providing a transparent and predictable execution outcome. This methodology is particularly valuable for institutional options trading and significant crypto asset transfers where minimizing market impact and ensuring a known execution price are paramount.
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