A One-Sided Quote, in financial markets and particularly in Request for Quote (RFQ) crypto systems, refers to a price indication from a market maker or liquidity provider that offers either to buy, a bid, or to sell, an ask, but not both simultaneously. This contrasts with a two-sided quote, which presents both a bid and an ask price, indicating a readiness to transact in either direction. The presence of one-sided quotes often signals uncertainty, reduced liquidity, or a temporary withdrawal of market-making commitment.
Mechanism
The mechanism for issuing a one-sided quote typically arises from a liquidity provider’s risk management protocols or market view. If a market maker perceives high directional risk, is struggling to price an asset, or has a significant inventory imbalance, they may only offer to take one side of a trade to mitigate further exposure or to offload a position. In an RFQ system, a participant might receive only a bid or only an ask if the quoting entity is unwilling to provide two-way pricing due to prevailing market conditions, such as extreme volatility in crypto options.
Methodology
Dealing with One-Sided Quotes involves strategic adaptation by institutional traders and smart trading systems. Methodologies include aggregating liquidity across multiple venues to find a counter-party for the missing side, dynamically adjusting order placement strategies to minimize market impact when liquidity is thin, or revising risk parameters to account for wider effective spreads. In crypto RFQ, the presence of one-sided quotes necessitates a more sophisticated order routing and execution logic, where the system might need to seek alternative liquidity sources or adjust trade sizes to avoid significant price degradation or failed execution in fragmented markets.
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