The Quote Firmness Ratio measures the proportion of firm quotes provided by a market maker in an RFQ (Request for Quote) system that are actually executable at the stated price and quantity, relative to the total quotes offered. This metric quantifies a liquidity provider’s reliability and commitment in institutional crypto trading.
Mechanism
This ratio is calculated by dividing the number of successfully executed trades originating from firm quotes by the total number of firm quotes transmitted within a specific period. System architectures track quote generation, expiration, and execution events to precisely determine the ratio, providing transparency into the efficacy of a market maker’s pricing engine.
Methodology
The strategic methodology for market makers focuses on optimizing their internal pricing algorithms and inventory management protocols to maintain a high quote firmness ratio, thereby building trust and securing more flow from institutional clients. A high ratio indicates robust risk management and liquidity provision capabilities, essential for competitive participation in crypto options trading and large block transactions.
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