Off-Exchange Wholesalers are financial institutions or market makers that execute trades away from public exchanges. They primarily internalize order flow from retail brokers or operate as principals in over-the-counter (OTC) transactions, providing liquidity directly.
Mechanism
These entities supply liquidity by quoting prices directly to clients or by routing orders to their internal trading desks. Their operations depend on sophisticated pricing engines and risk management systems that process incoming orders, execute against proprietary inventory, or facilitate transactions between counterparties, often offering price improvement over public market prices.
Methodology
The operational model of off-exchange wholesalers relies on capturing bid-ask spreads and profiting from order flow segmentation, particularly in markets with significant retail participation or for illiquid assets. In crypto, these entities frequently serve institutional clients seeking large block trades that would impact public exchange order books, providing discrete execution and tailored liquidity solutions.
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