A non-binding indication (NBI) in crypto trading, particularly in institutional request-for-quote (RFQ) systems, represents an informal, preliminary expression of interest in a transaction without creating a legal obligation for either party. NBIs provide initial price discovery or interest levels for a potential trade, allowing participants to gauge market depth or counterparty appetite before committing capital. They serve as a foundational step in negotiating complex or large-volume crypto transactions.
Mechanism
The mechanism for an NBI typically involves a buyer or seller broadcasting their interest for a specific digital asset and quantity to a network of potential counterparties. This broadcast might occur via specialized RFQ platforms or direct communication channels. The responding parties provide an indicative price or quantity they might transact at, which is subject to change based on market conditions or further negotiation. These indications are not executable orders but informational signals to facilitate subsequent firm quote requests.
Methodology
The methodology for utilizing NBIs in institutional crypto trading involves a staged approach to execution. Traders first use NBIs to test market conditions and gather pricing intelligence from various liquidity providers. This allows them to assess the feasibility and potential cost of a large trade without impacting the market. Based on the responses, they can then proceed to request firm, binding quotes for actual execution, optimizing for price and minimal market disruption.
Conditional orders mitigate information leakage by querying multiple dark venues with non-binding indications, committing to a firm order only after a match is found.
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