An RFQ Waiver refers to an exemption from the standard Request for Quote process, allowing a transaction to proceed without soliciting multiple bids from liquidity providers. In institutional crypto trading, this typically means a client can directly execute a trade with a single counterparty rather than engaging in a competitive bidding process. This mechanism is often used for highly illiquid assets, very large block trades, or urgent transactions where speed is prioritized over potential price discovery through multiple quotes.
Mechanism
The operational architecture of an RFQ Waiver involves bypassing the standard multi-dealer Request for Quote system. Instead, the trading platform or intermediary facilitates a direct negotiation or execution with a pre-selected liquidity provider. This mechanism requires explicit authorization from the client, acknowledging that the price obtained may not represent the absolute best available across all market participants, but balances this against other factors like execution certainty or minimal market impact for substantial orders.
Methodology
The strategic application of an RFQ Waiver in crypto institutional trading is employed when the benefits of direct execution, such as reduced market impact for large trades or immediate settlement for time-sensitive positions, outweigh the advantages of competitive price discovery. This methodology is particularly relevant in fragmented or less liquid crypto markets where broad RFQ processes might signal trading intent, causing adverse price movements. Firms implement robust internal controls to justify and document the use of RFQ Waivers, ensuring compliance with best execution policies under specific conditions.
A waived RFQ under MiFID II principles requires a data-driven justification of best execution to mitigate the market impact of large crypto derivative trades.
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