An RFQ Trigger, within a Request for Quote (RFQ) system, is a predefined condition or event that automatically initiates the process of soliciting price quotes from multiple liquidity providers. In institutional crypto trading, these triggers automate the sourcing of liquidity for large or complex trades, such as options blocks or illiquid tokens, which cannot be efficiently executed on public order books. Its purpose is to streamline the quote acquisition process, reduce manual intervention, and improve execution efficiency.
Mechanism
The mechanism of an RFQ Trigger involves monitoring various market and internal system parameters. These can include order size exceeding a certain threshold, a specific crypto asset reaching a predefined price level, insufficient liquidity detected on public exchanges, or a portfolio rebalancing event. Upon meeting these criteria, the system automatically constructs an RFQ message with trade details and transmits it to a pre-selected group of market makers or OTC desks.
Methodology
The methodology for configuring RFQ Triggers requires a comprehensive understanding of liquidity dynamics and trade execution objectives. It involves establishing precise rules and thresholds that balance the need for optimal pricing with the potential for market impact. The framework often incorporates smart trading logic to determine the most opportune moments for initiating an RFQ, ensuring that quotes are solicited under conditions most likely to yield favorable execution prices and minimal information leakage.
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