Rejection Symmetry, in the context of crypto Request for Quote (RFQ) systems, describes a reciprocal relationship where the rate and characteristics of quotes rejected by a liquidity taker align with the rate and characteristics of RFQs rejected by a liquidity provider. This indicates a balanced feedback loop in failed trade attempts.
Mechanism
This phenomenon manifests when a taker frequently declines quotes due to unfavorable pricing or insufficient size, causing dealers to, in turn, reject subsequent RFQs from that taker, perceiving reduced probability of execution. Conversely, a dealer consistently providing uncompetitive quotes will experience higher rejection rates from takers, leading to a reduced volume of future RFQs from the system or clients.
Methodology
The strategic approach involves monitoring and analyzing rejection rates and reasons from both sides of the RFQ interaction to identify and address systemic imbalances. Achieving positive rejection symmetry implies an efficient market where both participants engage with informed expectations. This fosters competitive pricing and higher execution rates in institutional crypto RFQ trading by disincentivizing persistently uncompetitive or non-committal behavior from either party.
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