Minimum Quote Lifetime, in the context of Request for Quote (RFQ) systems within crypto institutional options trading, specifies the shortest duration for which a submitted price quote must remain valid and executable. Its purpose is to provide certainty to the quoting party that their price will not be immediately “sniped” by fast-moving markets or unfairly rejected due to instantaneous price changes, thereby promoting robust liquidity provision.
Mechanism
The mechanism typically involves a timestamp associated with each quote. Upon receipt by the RFQ platform, the system enforces that the quote cannot be canceled or expire before the minimum lifetime period has elapsed. This duration is usually measured in milliseconds or microseconds, providing a protective window for the quoting market maker. It acts as a contractual obligation for the quote provider within that timeframe.
Methodology
The methodology for setting and managing minimum quote lifetime balances the need for quote stability with market responsiveness. A longer lifetime reduces quoting risk for liquidity providers but may expose the taker to stale prices, while a shorter lifetime increases market maker risk. Strategic implementation aims to optimize this parameter to encourage competitive quoting while minimizing information leakage and adverse selection in fast-moving crypto markets.
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