The RFQ Process, or Request for Quote process, is a formalized method of obtaining bespoke price quotes for a specific financial instrument, wherein a potential buyer or seller solicits bids from multiple liquidity providers before committing to a trade. It is a prevalent mechanism in OTC markets.
Mechanism
Operationally, a client initiates an RFQ by specifying the crypto asset, desired quantity, and transaction side. This request is electronically transmitted to a selected group of market makers or principal trading firms, who then respond with firm, executable two-sided prices (bid and ask) within a predefined time window. The client subsequently chooses the most competitive quote for execution.
Methodology
The methodology of the RFQ process is strategically advantageous for institutional crypto traders, particularly for large block trades or illiquid assets, as it facilitates competitive pricing, minimizes market impact, and provides access to deep, often off-exchange, liquidity. It is fundamental in institutional crypto options trading and OTC markets, enabling participants to achieve best execution by comparing multiple bids and offers.
An automated RFQ workflow systematizes best execution by transforming discrete negotiations into a data-driven, competitive, and fully auditable process.
Integrating an RFQ platform with an EMS transforms post-trade analytics from a historical record into a predictive engine for optimizing execution strategy.
MiFID II compels a data-driven optimization of RFQ participants, balancing price discovery against information leakage to create a defensible execution audit trail.
Counterparty selection architects the private liquidity network, directly governing transaction costs by balancing price competition against information leakage.
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