Mid-point matching is an order execution method where trades are executed at a price precisely halfway between the current best bid and best offer prices available in the market. This mechanism aims to provide price improvement for both buyers and sellers by splitting the bid-ask spread.
Mechanism
Within a trading system, when a buy order and a sell order for the same crypto asset are submitted, if their limit prices cross or are sufficiently close, the system identifies the mid-point of the prevailing national best bid and offer or an aggregated internal quote. Orders are then matched and executed at this calculated price, rather than at the bid or ask.
Methodology
This strategy is often employed in institutional crypto trading, particularly within request for quote systems or internal matching engines, to minimize market impact and reduce execution costs for large block trades. By facilitating passive execution at a favorable price, mid-point matching seeks to enhance trading efficiency and optimize transaction costs for institutional liquidity providers and takers.
Anonymous protocols re-architect best execution by shifting the focus from price alone to a quantifiable, defensible strategy of minimizing market impact.
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