A Rotational Dealer Policy, in the context of institutional crypto RFQ (Request for Quote) systems, describes a structured approach where quote requests are systematically distributed among a pre-approved pool of liquidity providers or dealers. The policy ensures fair access to order flow for all participating dealers and aims to optimize pricing and execution quality by promoting competitive bidding.
Mechanism
This policy functions by cycling through the list of approved dealers, sending quote requests to a subset of them for each trade, or by rotating the order in which dealers receive requests. Advanced systems may incorporate dealer performance metrics, such as fill rates or spread competitiveness, into the rotation algorithm, dynamically adjusting the frequency or priority of quote requests to improve overall execution outcomes.
Methodology
Implementing a Rotational Dealer Policy requires a robust RFQ platform capable of managing dealer pools, tracking response times, and evaluating quote quality. The methodology involves establishing clear criteria for dealer selection and performance monitoring, thereby maintaining a competitive environment, mitigating information leakage, and ensuring consistent access to optimal liquidity for institutional crypto trading.
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