A trading strategy or system capability where orders are divided and executed across multiple liquidity venues or at different price levels, often employing distinct algorithms or parameters for each segment, to optimize execution quality or minimize market impact.
Mechanism
Tiered execution operates by segmenting a large institutional order into smaller child orders. These segments are then dispatched to various execution channels, such as different crypto exchanges, dark pools, or OTC desks, based on predefined criteria like available liquidity, latency, and expected price impact. The system may dynamically adjust the size and routing of subsequent tiers based on real-time market feedback and partial fills.
Methodology
The methodology typically integrates smart order routing with algorithmic execution strategies like VWAP or TWAP, but with an added layer of conditional logic for different order “tiers.” For instance, a portion of the order might target high-liquidity venues aggressively, while another, more sensitive tier, seeks passive liquidity. This structured approach aims to minimize overall transaction costs, reduce information leakage, and improve execution certainty for large crypto block trades, especially within RFQ and institutional options trading environments.
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