RFQ Vs CLOB represents a comparative analysis of two primary execution models in financial markets, particularly relevant to crypto: Request for Quote (RFQ) and Central Limit Order Book (CLOB). RFQ involves direct negotiation with selected liquidity providers, while CLOB aggregates and displays all outstanding buy and sell orders.
Mechanism
An RFQ system functions as a bilateral or multilateral dealer-to-client interaction, where a client solicits prices from multiple market makers for a specific block trade. Conversely, a CLOB operates as a continuous auction market, matching buy and sell orders based on price-time priority, with transparent market depth and real-time pricing available to all participants.
Methodology
The strategic choice between RFQ and CLOB depends on trade size, liquidity requirements, desired price discretion, and market conditions. RFQ is often preferred for large, illiquid, or sensitive institutional crypto trades to minimize market impact, while CLOBs offer superior price discovery and immediate execution for smaller, highly liquid transactions, each serving distinct functional objectives within a trading architecture.
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