The obligation for an executing entity to take all reasonable steps to obtain the best possible result for client orders when trading crypto assets, specifically within a Request for Quote (RFQ) trading paradigm. This extends beyond simple price to encompass total cost, speed, likelihood of execution, and order size.
Mechanism
RFQ-based best execution is achieved by soliciting quotes from a sufficient number of competitive liquidity providers for a specific trade. The system or trader then objectively evaluates these received quotes, considering the spot price, option premium, applicable fees, and the depth of liquidity offered. The execution system selects the quote that minimizes total transaction costs and maximizes the probability of successful order completion.
Methodology
A robust methodology includes establishing clear execution policies, rigorous pre-trade analysis of market conditions, and post-trade reporting to confirm execution quality. Continuous monitoring of counterparty performance and periodic review of RFQ protocols are essential. For institutional crypto options, this involves balancing price optimization with the selection of reliable counterparties capable of handling large block trades efficiently.
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