Trading Mechanisms refer to the structured sets of rules, protocols, and technological systems that govern how buyers and sellers interact to discover prices and execute transactions for crypto assets and derivatives. These mechanisms define the operational framework for market participation, ranging from open order books to bilateral requests for quote (RFQ) or automated market makers (AMMs). Their purpose is to facilitate efficient allocation of capital, provide liquidity, and ensure fairness and transparency within diverse crypto market environments.
Mechanism
Mechanisms like central limit order books (CLOBs) match buy and sell orders based on price-time priority. RFQ systems facilitate bilateral price negotiation between institutional parties. Automated market makers, prevalent in DeFi, utilize mathematical functions and liquidity pools for price discovery and execution. Each mechanism processes order information, manages state transitions (e.g., order to fill), and disseminates trade data according to its specific design, ensuring defined interaction patterns.
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