# How Do the Si Quoting Obligations for Illiquid Bonds Differ from Those for Liquid Bonds? ▴ Question

**Published:** 2025-08-13
**Categories:** Question

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## Concept

The operational framework for a [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SI) in the European bond market is fundamentally shaped by a regulatory distinction between liquid and illiquid instruments. This division, established under the Markets in Financial Instruments Directive II (MiFID II) and its accompanying regulation (MiFIR), creates two divergent paths for quoting obligations. An investment firm’s status as an SI is determined by whether it deals on its own account when executing client orders outside a trading venue on an organised, frequent, systematic, and substantial basis. The core of the differentiation in quoting obligations lies in the regulatory intent to calibrate [pre-trade transparency](https://prime.greeks.live/area/pre-trade-transparency/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) requirements to the specific characteristics of the bond being traded.

For bonds classified as liquid, the rules are designed to foster a high degree of price transparency, reflecting the active and robust nature of their market. Conversely, for the vast majority of bonds deemed illiquid, the obligations are structured to facilitate [price discovery](https://prime.greeks.live/question/could-a-different-market-structure-achieve-both-price-improvement-and-efficient-price-discovery-simultaneously/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) without imposing transparency burdens that could stifle liquidity in markets where continuous trading is absent.

![A sophisticated, multi-layered trading interface, embodying an Execution Management System EMS, showcases institutional-grade digital asset derivatives execution. Its sleek design implies high-fidelity execution and low-latency processing for RFQ protocols, enabling price discovery and managing multi-leg spreads with capital efficiency across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-platform-market-microstructure.jpg)

## The Regulatory Foundation of the Liquidity Divide

The distinction [between liquid](https://prime.greeks.live/question/can-a-hybrid-rfq-protocol-effectively-bridge-the-gap-between-liquid-and-semi-liquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and illiquid is not a matter of subjective judgment for the SI; it is a formal classification determined by quantitative criteria set by the European Securities and Markets Authority (ESMA). This assessment is performed using a “class of financial instruments” approach ([COFIA](https://prime.greeks.live/area/cofia/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)), which groups bonds with similar characteristics (e.g. corporate, covered, sovereign) to assess their market liquidity. The determination hinges on data such as the average daily notional amount traded and the average number of trades per day over a specified assessment period. A bond is deemed liquid only if it surpasses these predefined thresholds.

The result is a binary system ▴ a bond is either liquid and subject to stringent quoting rules, or it is illiquid and subject to a more flexible regime. This classification is dynamic, with [ESMA](https://prime.greeks.live/area/esma/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) publishing the results of its liquidity assessments quarterly, compelling SIs to maintain systems capable of adjusting to changes in a bond’s status.

![A sophisticated mechanism features a segmented disc, indicating dynamic market microstructure and liquidity pool partitioning. This system visually represents an RFQ protocol's price discovery process, crucial for high-fidelity execution of institutional digital asset derivatives and managing counterparty risk within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/advanced-digital-asset-derivatives-rfq-liquidity-aggregation-system.jpg)

## Systematic Internaliser Status a Trigger Mechanism

An investment firm becomes an SI for a specific financial instrument by crossing quantitative thresholds related to its trading activity. Once a firm qualifies as an SI for a particular bond, it automatically assumes that status for all other bonds belonging to the same class and issued by the same entity or any entity within its group. This “trigger mechanism” means that a firm’s obligations can expand rapidly across a range of instruments based on its activity in just one. Consequently, the firm must have a robust internal system to monitor its trading volumes against the regulatory thresholds and to identify all bonds for which it has SI obligations.

The decision to opt-in to the SI regime is also available, allowing a firm to voluntarily subject itself to these rules even if it does not meet the quantitative criteria. This can be a strategic choice for firms wishing to offer a consistent service to clients across a broad range of instruments.

> The quoting obligations for Systematic Internalisers are bifurcated, imposing stringent, public pre-trade transparency for liquid bonds and a more discreet, on-request model for illiquid ones.

The primary purpose of imposing these obligations is to increase transparency in the over-the-counter (OTC) market, ensuring that the internalization of order flow by large investment firms does not detract from efficient price formation on public trading venues. For liquid bonds, the [quoting obligations](https://prime.greeks.live/question/how-has-the-2024-mifir-review-changed-quoting-obligations-for-non-equity-systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) are designed to be comparable to the pre-trade transparency required of regulated markets and multilateral trading facilities (MTFs), thereby creating a more level playing field. The system for [illiquid bonds](https://prime.greeks.live/area/illiquid-bonds/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), however, acknowledges the reality that forcing continuous, firm quotes in markets with infrequent trading could be detrimental, potentially causing market makers to withdraw and further reduce liquidity. Therefore, the obligations are tailored to support, rather than hinder, the unique price discovery process in these less-traded segments of the bond market.

![Intersecting abstract geometric planes depict institutional grade RFQ protocols and market microstructure. Speckled surfaces reflect complex order book dynamics and implied volatility, while smooth planes represent high-fidelity execution channels and private quotation systems for digital asset derivatives within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocols-digital-asset-microstructure-execution.jpg)

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## Strategy

The strategic implications of the dual quoting regimes for liquid and illiquid bonds are profound, compelling a Systematic Internaliser to operate with a bifurcated logic at the core of its trading infrastructure. The approach to quoting is not a monolithic strategy but a dynamic response to a bond’s regulatory classification. An SI’s strategy must therefore be built around two distinct pillars ▴ one supporting the high-transparency, continuous quoting environment for [liquid instruments](https://prime.greeks.live/question/how-does-the-justification-process-change-for-illiquid-versus-liquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and the other facilitating a discretionary, on-demand process for the vast universe of illiquid bonds. This necessitates a sophisticated operational design capable of seamlessly switching between these two modes of client interaction and market engagement.

![An abstract, angular, reflective structure intersects a dark sphere. This visualizes institutional digital asset derivatives and high-fidelity execution via RFQ protocols for block trade and private quotation](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocols-for-high-fidelity-digital-asset-execution.jpg)

## The Mandate for Liquid Instruments Public Firm Quotes

For bonds that ESMA classifies as liquid, the SI is subject to a stringent pre-trade transparency mandate under Article 18 of [MiFIR](https://prime.greeks.live/area/mifir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The core obligation is to make [firm quotes](https://prime.greeks.live/area/firm-quotes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) public when prompted for a quote by a client. This means the SI must provide a bid and ask price at which it is prepared to trade up to a size specific to the instrument. These quotes must be accessible to other clients in a non-discriminatory manner, effectively creating a source of public, executable liquidity.

While the obligation is triggered by a [client request](https://prime.greeks.live/question/how-can-a-dealers-system-differentiate-between-an-rfq-from-an-informed-client-versus-an-uninformed-client/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), some SIs may choose to stream firm prices continuously to their clients for the most liquid instruments, aligning their service with that of a trading venue. This strategic choice can enhance a firm’s competitive positioning by signaling a strong market-making commitment.

The prices quoted must [reflect prevailing market conditions](https://prime.greeks.live/question/how-can-a-firm-quantitatively-demonstrate-that-its-quotes-reflect-prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This requirement prevents SIs from posting stale or uncompetitive prices, ensuring their quotes contribute meaningfully to the price discovery process. The SI retains control over which clients can access its quotes, but this access must be governed by objective, non-discriminatory commercial policies. An SI can update its quotes at any time and has the right to withdraw them entirely under exceptional [market conditions](https://prime.greeks.live/question/how-do-exchanges-define-stressed-market-conditions-for-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), providing a crucial risk management safeguard.

![Central nexus with radiating arms symbolizes a Principal's sophisticated Execution Management System EMS. Segmented areas depict diverse liquidity pools and dark pools, enabling precise price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-liquidity-orchestration.jpg)

## Discretion in Illiquid Instruments Quotes on Request

The quoting obligation for illiquid bonds operates on a fundamentally different principle ▴ discretion. For these instruments, an SI is only required to disclose quotes to its clients upon request. There is no obligation to make these quotes public. This allows for a bilateral negotiation process that is better suited to the nature of illiquid markets, where price discovery is often a more tentative and relationship-driven process.

The SI has the commercial freedom to decide whether to provide a quote in response to a request, a stark contrast to the more binding obligations for liquid instruments. This flexibility is critical in managing risk for bonds that may not have readily available pricing information or immediate hedging capabilities.

This on-request model allows the SI to tailor its pricing to the specific client, trade size, and prevailing (or perceived) market conditions without being bound by a continuous public display. It preserves the traditional OTC market structure for instruments where imposing pre-trade transparency could lead to significant information leakage and disincentivize market-making. A firm’s strategy for illiquid bonds is therefore centered on relationship management, careful risk assessment, and the ability to price instruments where public data is scarce.

> An SI’s operational strategy must be dual-tracked, managing continuous public quoting for liquid bonds alongside discretionary, on-request quoting for illiquid ones.

The table below outlines the core strategic differences in the quoting obligations for liquid versus illiquid bonds under the SI regime.

| Obligation Feature | Liquid Bonds | Illiquid Bonds |
| --- | --- | --- |
| Quoting Trigger | Upon client request, the SI must provide a quote. The SI may also stream quotes continuously. | Upon client request; the SI has the discretion to provide a quote or not. |
| Quote Publication | Quotes must be made public to other clients in a non-discriminatory manner. | Quotes are disclosed only to the requesting client; there is no public disclosure requirement. |
| Firmness of Quote | Quotes must be firm and executable up to the instrument-specific size. | If a quote is provided, it is typically firm for the requesting client, but this is part of the bilateral agreement. |
| Pricing Basis | Must reflect prevailing market conditions. | Based on the SI’s commercial policy and risk assessment; greater flexibility. |
| Access to Quotes | Access can be controlled but must be based on objective, non-discriminatory policies. | Access is inherently bilateral and at the discretion of the SI. |

A significant strategic challenge is managing the “liquidity cliff,” where a bond’s classification changes following a quarterly ESMA assessment. A bond moving from illiquid to liquid status instantly subjects the SI to the more onerous public quoting regime. Conversely, a bond becoming illiquid allows for a shift to the more discretionary model.

An SI’s systems must be agile enough to automatically ingest ESMA’s updated liquidity data and reconfigure the quoting logic for all affected instruments without manual intervention. This requires a direct link between the firm’s compliance data [management system](https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and its [order management system](https://prime.greeks.live/area/order-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (OMS) and pricing engines.

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## Execution

The execution of quoting obligations as a Systematic Internaliser requires a sophisticated and highly automated technological and operational architecture. The regulatory bifurcation between liquid and illiquid bonds must be hardwired into the firm’s systems, from client interface to post-trade reporting. The execution framework is not merely a compliance function; it is the engine that allows the firm to meet its legal duties while managing risk and providing competitive client service. A failure in execution can lead to regulatory sanction, client dissatisfaction, and unmanaged market risk.

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## System Architecture for Dual-Regime Quoting

The core of the execution framework is an Order Management System (OMS) and Execution Management System (EMS) capable of handling parallel, rules-based workflows. The system’s logic must be driven by a real-time, internal database of financial instruments that is continuously updated with ESMA’s liquidity classifications.

- **Instrument Master Database** ▴ This central repository must contain the ISIN of every bond for which the firm has SI obligations. Crucially, it must have a field indicating the current [liquidity status](https://prime.greeks.live/question/how-does-esma-determine-the-liquidity-status-of-a-non-equity-instrument/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (‘Liquid’ or ‘Illiquid’) based on the latest ESMA data. 

- **Automated Liquidity Updates** ▴ The system must have an automated process, often via an API from a regulatory data vendor or directly from ESMA, to update the liquidity status of all relevant bonds on a quarterly basis. Manual updates are prone to error and are too slow to be compliant. 

- **Rules-Based Order Routing** ▴ When a client request for a quote (RFQ) is received, the OMS must first query the instrument master database. Based on the liquidity status, the RFQ is routed down one of two distinct paths. A request for a liquid bond triggers the public quoting workflow, while a request for an illiquid bond triggers the discretionary, bilateral workflow. 

- **Pricing Engine Integration** ▴ The pricing engine must also be aware of the liquidity status. For [liquid bonds](https://prime.greeks.live/area/liquid-bonds/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), it must pull in real-time market data to ensure the quote reflects prevailing conditions. For illiquid bonds, it may use different models based on evaluated pricing, comparable bond analysis, or other internal methodologies. 

![Dark, reflective planes intersect, outlined by a luminous bar with three apertures. This visualizes RFQ protocols for institutional liquidity aggregation and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-dynamics.jpg)

## The Quoting Workflow in Practice

The practical steps of handling a client RFQ differ substantially depending on the bond’s liquidity. The following table details the execution workflow for each scenario from the moment a client request arrives.

| Step | Liquid Bond Execution Workflow | Illiquid Bond Execution Workflow |
| --- | --- | --- |
| 1. RFQ Reception | Client RFQ for Bond XYZ is received by the SI’s system. | Client RFQ for Bond ABC is received by the SI’s system. |
| 2. Liquidity Check | System queries internal database; identifies Bond XYZ as ‘Liquid’. | System queries internal database; identifies Bond ABC as ‘Illiquid’. |
| 3. Quote Generation | Pricing engine generates a two-way quote reflecting prevailing market conditions up to the Size Specific to the Instrument (SSTI). | Trader is alerted. Based on commercial policy and risk, decides whether to quote. If yes, a price is determined. |
| 4. Quote Dissemination | The quote is sent directly to the requesting client. Simultaneously, the quote is made public via the firm’s proprietary systems or an Approved Publication Arrangement (APA) to all other eligible clients. | The quote is sent exclusively to the requesting client. There is no public dissemination. |
| 5. Client Execution | The client can execute against the firm quote. The SI is obligated to trade at that price up to the quoted size. | The client can execute against the quote. The process is a bilateral transaction. |
| 6. Post-Trade Reporting | The transaction is reported publicly via an APA as close to real-time as possible. Deferrals are possible for large-in-scale trades. | The transaction is reported publicly via an APA. Deferrals on publication are more commonly applicable due to the instrument’s illiquid nature or size. |

> Executing SI obligations correctly requires an automated, rules-based system where a bond’s regulatory liquidity status dictates every step of the quoting and trading workflow.

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## Compliance and Risk Management Protocols

Beyond the core trading workflow, the execution framework must incorporate robust compliance and risk management layers. This includes:

- **Record Keeping** ▴ All received RFQs, quotes provided (even if not traded), and resulting transactions must be timestamped and stored for a minimum of five years. This is essential for demonstrating compliance to regulators. For illiquid bonds, the firm must also be able to justify its decision if it chooses not to provide a quote. 

- **[Best Execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Monitoring** ▴ The SI must still adhere to its overarching best execution policy. For liquid bonds, the public quote provides a clear data point for assessment. For illiquid bonds, the firm must have a process to demonstrate that the price offered was fair and reasonable in the context of the market, even without public reference points. This often involves documenting the pricing methodology used for each trade. 

- **Risk Limits** ▴ The system must have pre-trade risk controls that prevent the dissemination of quotes that would breach the firm’s exposure limits. This is particularly important for automated quoting in liquid instruments, where a system error could otherwise lead to significant, unintended risk accumulation. 

Ultimately, the successful execution of SI quoting obligations is a testament to a firm’s investment in technology and its commitment to building a compliance-aware trading architecture. The difference in obligations between liquid and illiquid bonds is not a minor detail; it is the central organizing principle around which the entire operational structure must be built.

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## References

- BaFin. (2017). Systematic internalisers ▴ Main points of the new supervisory regime under MiFID II. Federal Financial Supervisory Authority.

- European Securities and Markets Authority. (2022). Q&As on MiFID II and MiFIR transparency topics (ESMA70-872942901-35).

- International Capital Market Association. (2016). MiFID II/R ▴ Systematic Internalisers An ICMA ‘FAQ’ for bond markets.

- Emissions-EUETS.com. (2024). Systematic internaliser (SI) in MiFID II – a counterparty, not a trading venue.

- Scott, A. (2017). The new MiFID II/MIFIR rules for systematic internalisers. Clifford Chance.

- Latham & Watkins. (2017). The MiFID II Systematic Internaliser Regime.

- AFME. (2017). Systematic Internalisers (SIs) under MiFID II. Association for Financial Markets in Europe.

- Norton Rose Fulbright. (2017). MiFID II ▴ The Systematic Internaliser Regime.

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## Reflection

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## The Structural Imprint of Regulation

The division of bond quoting obligations into liquid and illiquid regimes does more than create a set of compliance tasks. It imprints a specific structure onto the market itself, shaping the behavior of both market makers and their clients. The framework compels firms to build a dual-mode operational capacity, one that can live up to the ideals of public transparency while simultaneously preserving the necessary discretion for less-traded instruments. Contemplating this system requires moving beyond the checklist of rules to ask more fundamental questions about its impact.

How does this regulatory bifurcation influence the very formation of liquidity? Does the “liquidity cliff” create unintended incentives or disincentives for trading around the time of the quarterly re-assessments?

Answering these questions reveals that a firm’s response to the SI regime is a core component of its market intelligence. The data generated from these distinct workflows ▴ pricing, hit rates, client demand patterns for both liquid and illiquid instruments ▴ becomes a rich source of insight. The ability to analyze this flow, to understand how and why clients interact differently with each regime, is a significant competitive asset.

The regulations, therefore, provide not just a rulebook but also the blueprint for a data-gathering architecture. The ultimate strategic advantage lies not in merely complying with the divergent obligations, but in mastering the operational duality and harnessing the intelligence it produces.

![Visualizing institutional digital asset derivatives market microstructure. A central RFQ protocol engine facilitates high-fidelity execution across diverse liquidity pools, enabling precise price discovery for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-across-multi-asset-liquidity.jpg)

## Glossary

<a href="https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, abstract system interface with glowing green lines symbolizing RFQ pathways and high-fidelity execution. This visualizes market microstructure for institutional digital asset derivatives, emphasizing private quotation and dark liquidity within a Prime RFQ framework, enabling best execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-for-institutional-digital-asset-derivatives.jpg)

## Systematic Internaliser

Meaning ▴ A Systematic Internaliser (SI) is a financial institution executing client orders against its own capital on an organized, frequent, systematic basis off-exchange. </a><a href="https://prime.greeks.live/area/pre-trade-transparency/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision cross-section of an institutional digital asset derivatives system, revealing intricate market microstructure. Toroidal halves represent interconnected liquidity pools, centrally driven by an RFQ protocol](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-architecture-revealing-precision-rfq-protocol-engine-for-optimal-high-fidelity-execution-and-latent-liquidity-aggregation.jpg)

## Pre-Trade Transparency

Meaning ▴ Pre-Trade Transparency refers to the real-time dissemination of bid and offer prices, along with associated sizes, prior to the execution of a trade. </a><a href="https://prime.greeks.live/question/could-a-different-market-structure-achieve-both-price-improvement-and-efficient-price-discovery-simultaneously/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Geometric panels, light and dark, interlocked by a luminous diagonal, depict an institutional RFQ protocol for digital asset derivatives. Central nodes symbolize liquidity aggregation and price discovery within a Principal's execution management system, enabling high-fidelity execution and atomic settlement in market microstructure](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-1.jpg)

## Price Discovery

A system can achieve both goals by using private, competitive negotiation for execution and public post-trade reporting for discovery. </a><a href="https://prime.greeks.live/question/can-a-hybrid-rfq-protocol-effectively-bridge-the-gap-between-liquid-and-semi-liquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition featuring two overlapping digital asset liquidity pools, intersected by angular structures representing multi-leg RFQ protocols. This visualizes dynamic price discovery, high-fidelity execution, and aggregated liquidity within institutional-grade crypto derivatives OS, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimizing-aggregated-liquidity-and-multi-leg-execution-via-advanced-market-microstructure.jpg)

## Between Liquid

A hybrid RFQ protocol bridges liquidity gaps by creating a controlled, competitive auction environment for traditionally untradable assets. </a><a href="https://prime.greeks.live/area/cofia/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Transparent geometric forms symbolize high-fidelity execution and price discovery across market microstructure. A teal element signifies dynamic liquidity pools for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-rfq-execution-for-institutional-digital-asset-derivatives-1.jpg)

## Cofia

Meaning ▴ COFIA, or Controlled Order Flow Intermediation Algorithm, represents a sophisticated programmatic framework engineered for the intelligent routing and execution optimization of institutional order flow within fragmented digital asset derivative markets. </a><a href="https://prime.greeks.live/area/esma/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered modular components display a central control, data input panel, and numerical values on cylindrical elements. This signifies an institutional Prime RFQ for digital asset derivatives, enabling RFQ protocol aggregation, high-fidelity execution, algorithmic price discovery, and volatility surface calibration for portfolio margin](https://options.greeks.live/wp-content/uploads/2025/07/firm-fx-options-rfq-trade-system-key-microstructure-data-flow-core-engine.jpg)

## Esma

Meaning ▴ ESMA, the European Securities and Markets Authority, functions as an independent European Union agency responsible for safeguarding the stability of the EU's financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, alongside enhancing investor protection. </a><a href="https://prime.greeks.live/question/how-has-the-2024-mifir-review-changed-quoting-obligations-for-non-equity-systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting transparent and opaque geometric planes, symbolizing the intricate market microstructure of institutional digital asset derivatives. Visualizes high-fidelity execution and price discovery via RFQ protocols, demonstrating multi-leg spread strategies and dark liquidity for capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-market-microstructure-architecture.jpg)

## Quoting Obligations

The 2024 MiFIR review eliminates pre-trade quoting obligations for non-equity SIs, re-architecting the framework for bilateral liquidity. </a><a href="https://prime.greeks.live/area/illiquid-bonds/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, modular institutional grade system with glowing teal conduits represents advanced RFQ protocol pathways. This illustrates high-fidelity execution for digital asset derivatives, facilitating private quotation and efficient liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-ecosystem-powering-high-fidelity-rfq-execution-and-optimal-liquidity-discovery.jpg)

## Illiquid Bonds

Meaning ▴ Illiquid bonds are debt instruments not readily convertible to cash at fair market value due to insufficient trading activity or limited market depth. </a><a href="https://prime.greeks.live/question/how-does-the-justification-process-change-for-illiquid-versus-liquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, multi-component device with a dark blue base and beige bands culminates in a sophisticated top mechanism. This precision instrument symbolizes a Crypto Derivatives OS facilitating RFQ protocol for block trade execution, ensuring high-fidelity execution and atomic settlement for institutional-grade digital asset derivatives across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/08/advanced-mechanism-for-principal-trading-firm-rfq-protocols-and-high-fidelity-digital-asset-derivatives-execution.jpg)

## Liquid Instruments

The justification process shifts from quantitative benchmark comparison for liquid assets to qualitative process documentation for illiquid ones. </a><a href="https://prime.greeks.live/area/firm-quotes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated institutional-grade device featuring a luminous blue core, symbolizing advanced price discovery mechanisms and high-fidelity execution for digital asset derivatives. This intelligence layer supports private quotation via RFQ protocols, enabling aggregated inquiry and atomic settlement within a Prime RFQ framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-core-intelligence.jpg)

## Firm Quotes

Meaning ▴ A Firm Quote represents a committed, executable price and size at which a market participant is obligated to trade for a specified duration. </a><a href="https://prime.greeks.live/area/mifir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A polished, light surface interfaces with a darker, contoured form on black. This signifies the RFQ protocol for institutional digital asset derivatives, embodying price discovery and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-interface.jpg)

## Mifir

Meaning ▴ MiFIR, the Markets in Financial Instruments Regulation, constitutes a foundational legislative framework within the European Union, enacted to enhance the transparency, efficiency, and integrity of financial markets. </a><a href="https://prime.greeks.live/question/how-can-a-dealers-system-differentiate-between-an-rfq-from-an-informed-client-versus-an-uninformed-client/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A futuristic system component with a split design and intricate central element, embodying advanced RFQ protocols. This visualizes high-fidelity execution, precise price discovery, and granular market microstructure control for institutional digital asset derivatives, optimizing liquidity provision and minimizing slippage](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocols-for-digital-asset-derivatives-price-discovery.jpg)

## Client Request

A dealer's system differentiates clients by using a dynamic scoring model that analyzes behavioral history and RFQ context to quantify adverse selection risk. </a><a href="https://prime.greeks.live/question/how-can-a-firm-quantitatively-demonstrate-that-its-quotes-reflect-prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise metallic cross, symbolizing principal trading and multi-leg spread structures, rests on a dark, reflective market microstructure surface. Glowing algorithmic trading pathways illustrate high-fidelity execution and latency optimization for institutional digital asset derivatives via private quotation](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-architecture.jpg)

## Reflect Prevailing Market Conditions

A firm proves its quotes reflect market conditions by systematically benchmarking them against a synthesized, multi-factor market price. </a><a href="https://prime.greeks.live/question/how-do-exchanges-define-stressed-market-conditions-for-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two distinct components, beige and green, are securely joined by a polished blue metallic element. This embodies a high-fidelity RFQ protocol for institutional digital asset derivatives, ensuring atomic settlement and optimal liquidity](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-for-digital-asset-derivatives-high-fidelity-link.jpg)

## Market Conditions

Exchanges define stressed market conditions as a codified, trigger-based state that relaxes liquidity obligations to ensure market continuity. </a><a href="https://prime.greeks.live/area/order-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated digital asset derivatives RFQ engine's core components are depicted, showcasing precise market microstructure for optimal price discovery. Its central hub facilitates algorithmic trading, ensuring high-fidelity execution across multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimizing-multi-leg-spreads-for-optimal-capital-efficiency.jpg)

## Order Management System

Meaning ▴ A robust Order Management System is a specialized software application engineered to oversee the complete lifecycle of financial orders, from their initial generation and routing to execution and post-trade allocation. </a><a href="https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A detailed view of an institutional-grade Digital Asset Derivatives trading interface, featuring a central liquidity pool visualization through a clear, tinted disc. Subtle market microstructure elements are visible, suggesting real-time price discovery and order book dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-system-microstructure-display.jpg)

## Management System

An Order Management System governs portfolio strategy and compliance; an Execution Management System masters market access and trade execution. </a><a href="https://prime.greeks.live/question/how-does-esma-determine-the-liquidity-status-of-a-non-equity-instrument/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark cylindrical core precisely intersected by sharp blades symbolizes RFQ Protocol and High-Fidelity Execution. Spheres represent Liquidity Pools and Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-execution-for-institutional-digital-asset-derivatives.jpg)

## Liquidity Status

ESMA determines non-equity liquidity via a data-driven, systematic process applying quantitative thresholds to classify instruments and dictate transparency rules. </a><a href="https://prime.greeks.live/area/liquid-bonds/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A reflective metallic disc, symbolizing a Centralized Liquidity Pool or Volatility Surface, is bisected by a precise rod, representing an RFQ Inquiry for High-Fidelity Execution. Translucent blue elements denote Dark Pool access and Private Quotation Networks, detailing Institutional Digital Asset Derivatives Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution.jpg)

## Liquid Bonds

Meaning ▴ Liquid Bonds represent highly fungible, debt-like digital instruments engineered for institutional capital deployment within decentralized finance and digital asset markets. </a><a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark blue sphere, representing a deep liquidity pool for digital asset derivatives, opens via a translucent teal RFQ protocol. This unveils a principal's operational framework, detailing algorithmic trading for high-fidelity execution and atomic settlement, optimizing market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/rfq-block-trade-liquidity-microstructure-execution-prime-os-derivatives-capital.jpg)

## Best Execution

Meaning ▴ Best Execution is the obligation to obtain the most favorable terms reasonably available for a client's order. </a>

**Tags:** [Systematic Internaliser](https://options.greeks.live/area/systematic-internaliser/), [Bond Quoting Obligations](https://options.greeks.live/area/bond-quoting-obligations/), [Pre-Trade Transparency](https://options.greeks.live/area/pre-trade-transparency/), [Illiquid Bonds](https://options.greeks.live/area/illiquid-bonds/), [Liquid Bonds](https://options.greeks.live/area/liquid-bonds/), [Firm Quotes](https://options.greeks.live/area/firm-quotes/)	

## Discover More

- 
### [How Does the Post-Trade Deferral Mechanism under MiFID II Help Mitigate Market Impact?](https://options.greeks.live/question/how-does-the-post-trade-deferral-mechanism-under-mifid-ii-help-mitigate-market-impact/)
![A translucent sphere with intricate metallic rings, an 'intelligence layer' core, is bisected by a sleek, reflective blade. This visual embodies an 'institutional grade' 'Prime RFQ' enabling 'high-fidelity execution' of 'digital asset derivatives' via 'private quotation' and 'RFQ protocols', optimizing 'capital efficiency' and 'market microstructure' for 'block trade' operations.](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-engine-for-digital-asset-derivatives-best-execution.jpg)

The MiFID II post-trade deferral mechanism shields large trades from immediate disclosure, mitigating market impact and reducing transaction costs.

- 
### [What Are the Key Differences in SI Quoting Obligations for Equity versus Non-Equity Instruments?](https://options.greeks.live/question/what-are-the-key-differences-in-si-quoting-obligations-for-equity-versus-non-equity-instruments/)
![Polished metallic surface with a central intricate mechanism, representing a high-fidelity market microstructure engine. Two sleek probes symbolize bilateral RFQ protocols for precise price discovery and atomic settlement of institutional digital asset derivatives on a Prime RFQ, ensuring best execution for Bitcoin Options.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-engine-core-market-microstructure-intelligence-layer.jpg)

Systematic Internaliser quoting obligations diverge based on asset class, mandating public, firm quotes for equities while allowing for discretionary, bilateral quoting for non-equities.

- 
### [How Do Regulatory Changes like MiFID II Impact the Measurement and Reporting of Dark Pool Transaction Costs?](https://options.greeks.live/question/how-do-regulatory-changes-like-mifid-ii-impact-the-measurement-and-reporting-of-dark-pool-transaction-costs/)
![Abstract layers in grey, mint green, and deep blue visualize a Principal's operational framework for institutional digital asset derivatives. The textured grey signifies market microstructure, while the mint green layer with precise slots represents RFQ protocol parameters, enabling high-fidelity execution, private quotation, capital efficiency, and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-layered-rfq-protocol-for-digital-asset-execution-system.jpg)

MiFID II mandates a granular, evidence-based system for measuring and reporting dark pool costs to enforce transparency and best execution.

- 
### [What Are the Primary Regulatory Differences between Equity and Fixed Income Trade Reporting?](https://options.greeks.live/question/what-are-the-primary-regulatory-differences-between-equity-and-fixed-income-trade-reporting/)
![Abstract RFQ engine, transparent blades symbolize multi-leg spread execution and high-fidelity price discovery. The central hub aggregates deep liquidity pools. Red glows indicate real-time market microstructure dynamics and optimal capital efficiency for institutional digital asset derivatives block trades.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-engine-for-crypto-derivatives-high-fidelity-block-trade.jpg)

Equity reporting orbits a public, real-time price, while fixed-income reporting illuminates a negotiated, post-trade reality.

- 
### [What Are the Key Technological and Operational Challenges for a Firm Seeking to Become a Systematic Internaliser?](https://options.greeks.live/question/what-are-the-key-technological-and-operational-challenges-for-a-firm-seeking-to-become-a-systematic-internaliser/)
![A crystalline droplet, representing a block trade or liquidity pool, rests precisely on an advanced Crypto Derivatives OS platform. Its internal shimmering particles signify aggregated order flow and implied volatility data, demonstrating high-fidelity execution and capital efficiency within market microstructure, facilitating private quotation via RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-protocol-best-execution.jpg)

Becoming a Systematic Internaliser involves immense technological and operational challenges in pricing, transparency, and reporting.

- 
### [To What Extent Did the Si Framework Succeed in Its Goal of Improving Price Discovery in Non-Equity Markets?](https://options.greeks.live/question/to-what-extent-did-the-si-framework-succeed-in-its-goal-of-improving-price-discovery-in-non-equity-markets/)
![A sleek, bimodal digital asset derivatives execution interface, partially open, revealing a dark, secure internal structure. This symbolizes high-fidelity execution and strategic price discovery via institutional RFQ protocols. It optimizes capital efficiency by aggregating latent liquidity, minimizing slippage, ensuring best execution for multi-leg spreads and block trades, and mitigating information leakage.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocols-price-discovery.jpg)

The SI framework partially succeeded by formalizing OTC transparency, but its impact on price discovery was limited by risk management strategies.

- 
### [How Do MiFID II Regulations Specifically Impact High-Frequency RFQ Strategies in Europe?](https://options.greeks.live/question/how-do-mifid-ii-regulations-specifically-impact-high-frequency-rfq-strategies-in-europe/)
![A transparent sphere, representing a granular digital asset derivative or RFQ quote, precisely balances on a proprietary execution rail. This symbolizes high-fidelity execution within complex market microstructure, driven by rapid price discovery from an institutional-grade trading engine, optimizing capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-precision-1.jpg)

MiFID II forces HFT RFQ strategies to pivot from latency arbitrage to data-centric, compliance-embedded execution systems.

- 
### [How Does MiFID II Regulate the Activities of Systematic Internalisers?](https://options.greeks.live/question/how-does-mifid-ii-regulate-the-activities-of-systematic-internalisers/)
![Precision-engineered system components in beige, teal, and metallic converge at a vibrant blue interface. This symbolizes a critical RFQ protocol junction within an institutional Prime RFQ, facilitating high-fidelity execution and atomic settlement for digital asset derivatives. It optimizes latency and market microstructure for private quotation and block trades.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-connectivity-layer-for-digital-asset-derivatives-execution.jpg)

MiFID II codifies principal liquidity provision, mandating exchange-like transparency for high-volume internalizing firms.

- 
### [Can an Investment Firm Choose to Opt-In to the Systematic Internaliser Regime Voluntarily?](https://options.greeks.live/question/can-an-investment-firm-choose-to-opt-in-to-the-systematic-internaliser-regime-voluntarily/)
![Intricate mechanisms represent a Principal's operational framework, showcasing market microstructure of a Crypto Derivatives OS. Transparent elements signify real-time price discovery and high-fidelity execution, facilitating robust RFQ protocols for institutional digital asset derivatives and options trading.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

An investment firm can voluntarily adopt the Systematic Internaliser designation to formalize its principal trading activities.

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---

**Original URL:** https://options.greeks.live/question/how-do-the-si-quoting-obligations-for-illiquid-bonds-differ-from-those-for-liquid-bonds/
