Multi-Leg Order Routing refers to the process of directing individual components (legs) of a composite trading strategy to appropriate execution venues across a fragmented market landscape. The primary purpose is to facilitate the efficient and coordinated placement of interdependent orders that constitute a single, complex trading instruction. This ensures strategy integrity.
Mechanism
A dedicated order routing system receives a multi-leg instruction, disaggregates it into its constituent orders, and then applies predefined rules or algorithmic logic to determine the optimal destination for each leg. This involves evaluating factors such as available liquidity, prevailing prices, transaction fees, and connectivity latencies across various crypto exchanges and OTC desks.
Methodology
The strategic approach relies on sophisticated routing algorithms designed to ensure the integrity of the overall multi-leg strategy. It often involves smart order routing (SOR) principles, prioritizing execution speed and price improvement while managing inter-leg risk, such as execution order or price skew. This mitigates potential disruption to the intended profit or risk profile of the complete strategy.
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