# How Does the SI Framework Impact Liquidity on Public Exchanges? ▴ Question

**Published:** 2025-08-01
**Categories:** Question

---

![A central star-like form with sharp, metallic spikes intersects four teal planes, on black. This signifies an RFQ Protocol's precise Price Discovery and Liquidity Aggregation, enabling Algorithmic Execution for Multi-Leg Spread strategies, mitigating Counterparty Risk, and optimizing Capital Efficiency for institutional Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-price-discovery-and-execution.jpg)

![A central, intricate blue mechanism, evocative of an Execution Management System EMS or Prime RFQ, embodies algorithmic trading. Transparent rings signify dynamic liquidity pools and price discovery for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-framework-driving-high-fidelity-rfq-execution-and-optimized-market-microstructure-for-capital-efficiency.jpg)

## Concept

An examination of the [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SI) framework necessitates viewing it as a deliberate re-architecting of European market structure. Your direct experience has likely confirmed that the clean lines of a [central limit order book](https://prime.greeks.live/area/central-limit-order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), while foundational, represent an incomplete schematic of modern liquidity pathways. The SI regime, codified under the Markets in Financial Instruments Directive II (MiFID II), is a direct regulatory and technological response to a persistent operational challenge for institutional market participants ▴ the execution of significant orders without incurring the full cost of market impact inherent to transparent, continuous auction mechanisms. It formalizes a bilateral trading environment that operates in parallel with, and in direct relationship to, public exchanges.

The core design of the SI is that of an investment firm dealing on its own account, executing client orders outside of a regulated market or multilateral trading facility (MTF). This structure places the firm as the principal counterparty to its client’s trade. The SI framework was expanded under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), moving beyond its initial application in equities to encompass a broader range of financial instruments. This expansion was part of a larger regulatory project aimed at governing all forms of organized trading and increasing transparency across European markets.

A primary objective was to bring the significant volume of over-the-counter (OTC) trading into a more structured and observable regulatory perimeter. The outlawing of broker crossing networks (BCNs) for equity trading, which previously matched client orders internally, created a functional void that the SI regime was positioned to fill. BCNs crossed client interest, whereas SIs commit their own capital, a fundamental distinction in the operational model and risk profile.

> The Systematic Internaliser framework establishes a regulated, principal-based trading channel that directly competes with and complements public exchange liquidity.

This system is not an accident of market evolution; it is a calculated design. It recognizes that institutional order flow possesses characteristics and requirements distinct from retail or high-frequency flow. The need to manage [information leakage](https://prime.greeks.live/area/information-leakage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for large orders is paramount. Placing a significant block order directly onto a lit exchange [order book](https://prime.greeks.live/area/order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) broadcasts intent to the entire market, inviting adverse price movements before the order can be fully executed.

The SI model provides a mechanism to mitigate this risk by internalizing the order. The firm absorbs the client’s order onto its own book, providing a single price for a specified size. This process is governed by strict quoting obligations intended to ensure the client receives a price that is reflective of prevailing market conditions, tethering the SI’s private liquidity to the public [price discovery process](https://prime.greeks.live/question/how-does-information-asymmetry-in-an-rfq-workflow-affect-the-price-discovery-process-for-illiquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) occurring on exchanges.

Understanding the SI framework’s impact begins with this architectural premise. It is a system of parallel liquidity provision. One channel is the [public exchange](https://prime.greeks.live/question/what-regulatory-and-compliance-frameworks-govern-the-use-of-rfq-protocols-in-cross-exchange-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), an all-to-all, transparent mechanism that is the primary engine of price discovery. The other channel is a network of SIs, many-to-one, bilateral mechanisms that offer potential [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) improvements in exchange for fragmenting overall market volume.

The critical tension, the central question for any market participant, arises from the interaction between these two systems. The flow of orders through one directly affects the composition and quality of liquidity available in the other. Therefore, analyzing the SI framework is an exercise in systems dynamics, examining how a regulatory structure designed to solve one problem ▴ discreet institutional execution ▴ creates a series of predictable and quantifiable effects on the broader market ecosystem.

![Abstract visualization of institutional digital asset derivatives. Intersecting planes illustrate 'RFQ protocol' pathways, enabling 'price discovery' within 'market microstructure'](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-rfq-execution-liquidity-pool-market-microstructure-protocol.jpg)

![A metallic ring, symbolizing a tokenized asset or cryptographic key, rests on a dark, reflective surface with water droplets. This visualizes a Principal's operational framework for High-Fidelity Execution of Institutional Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-protocol-execution.jpg)

## Strategy

The integration of [Systematic Internalisers](https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) into the European market fabric presents a strategic challenge that demands a sophisticated and adaptive execution policy. A passive approach, one that views SIs as just another destination in a smart order router’s waterfall logic, fails to appreciate the systemic dynamics at play. A superior strategy originates from understanding the bifurcation of liquidity and designing a framework to navigate it intentionally.

The existence of SIs creates a [market structure](https://prime.greeks.live/area/market-structure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) with two distinct types of liquidity pools, each with its own characteristics and strategic implications. The [public exchanges](https://prime.greeks.live/question/could-excessive-dark-pool-trading-volume-destabilize-the-primary-public-exchanges/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) remain the central forum for price discovery, while SIs represent a vast, distributed network of principal-based liquidity.

![The image displays a sleek, intersecting mechanism atop a foundational blue sphere. It represents the intricate market microstructure of institutional digital asset derivatives trading, facilitating RFQ protocols for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution.jpg)

## The Bifurcation of Market Liquidity

Imagine the total volume of market orders as a river. In a centralized market model, this river flows through a single, wide channel ▴ the public exchange. All participants can see the flow, gauge its depth from the order book, and interact with it directly. The introduction of the SI framework is akin to building a series of parallel irrigation canals.

These canals divert a significant portion of the river’s flow. Specifically, SIs tend to attract less price-sensitive, or “uninformed,” retail and institutional [order flow](https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This is because SIs compete for this flow by offering marginal [price improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and absorbing the execution risk. The result is that the water remaining in the main channel, the public exchange, has a different composition.

It becomes disproportionately populated by more “informed” flow, such as the aggressive orders of statistical arbitrage funds or participants reacting to new information. This concentration of informed flow increases the risk for market makers on public exchanges, a condition known as [adverse selection](https://prime.greeks.live/area/adverse-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). In response, these market makers may [widen their bid-ask spreads](https://prime.greeks.live/question/what-is-the-quantitative-impact-of-post-trade-transparency-on-bid-ask-spreads-in-interest-rate-swaps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and reduce the size they are willing to quote, leading to a potential degradation of visible liquidity on the lit book.

> A strategic framework for execution must actively manage the trade-offs between the price improvement offered by SIs and the impact of liquidity fragmentation on public markets.

This dynamic creates a feedback loop. As [lit market](https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) liquidity becomes thinner and spreads wider, the execution offered by SIs, which is benchmarked against those public prices, can appear more attractive, potentially diverting even more flow away from the exchanges. The strategic imperative is to develop a system that understands this dynamic and makes routing decisions based on the specific characteristics of the order and the real-time state of both lit and SI liquidity pools.

![An abstract, precisely engineered construct of interlocking grey and cream panels, featuring a teal display and control. This represents an institutional-grade Crypto Derivatives OS for RFQ protocols, enabling high-fidelity execution, liquidity aggregation, and market microstructure optimization within a Principal's operational framework for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/integrated-principal-trading-system-modules-for-institutional-digital-asset-derivatives-rfq-execution-and-optimized-market-microstructure.jpg)

## What Is the Optimal Routing Strategy?

There is no single static answer. The optimal strategy is dynamic and depends on the order’s size, the security’s liquidity profile, and the institution’s own risk tolerance for [market impact](https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) versus information leakage. MiFID II’s [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) mandate requires firms to take all sufficient steps to obtain the best possible result for their clients, considering price, costs, speed, likelihood of execution, and size.

This explicitly compels firms to look beyond the lit book and build a process that can access and evaluate SI liquidity. A robust strategic framework involves several components:

- **Pre-Trade Analysis** ▴ Before an order is routed, its characteristics must be assessed. Is it a large block that would significantly move the market? Is it a small order in a highly liquid stock? The answer determines the priority. For the large block, minimizing information leakage by engaging with an SI might be the primary goal. For the small order, capturing the tightest possible spread, wherever it is found, is the objective.

- **Dynamic Venue Analysis** ▴ The system must continuously analyze the execution quality available from all potential venues, including a range of SIs and public exchanges. This involves monitoring not just the quoted prices but also the fill rates and post-trade market impact associated with each venue.

- **Sophisticated Routing Logic** ▴ Simple price-based routing is insufficient. The smart order router (SOR) must be configured with logic that can, for instance, break up a large order, sending parts to SIs for potential price improvement and working other parts on the lit exchange to participate in [price discovery](https://prime.greeks.live/area/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and capture available depth.

![Two dark, circular, precision-engineered components, stacked and reflecting, symbolize a Principal's Operational Framework. This layered architecture facilitates High-Fidelity Execution for Block Trades via RFQ Protocols, ensuring Atomic Settlement and Capital Efficiency within Market Microstructure for Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-prime-os-execution-protocol.jpg)

## A Comparative Analysis of Trading Venues

To implement such a strategy, it is essential to have a clear, architectural understanding of how each venue type functions. The following table provides a comparative framework for the primary execution venues within the MiFID II landscape.

| Attribute | Public Exchange (e.g. Euronext) | Multilateral Trading Facility (MTF) | Systematic Internaliser (SI) |
| --- | --- | --- | --- |
| Price Formation | Continuous two-sided auction; central limit order book. Considered the primary mechanism for price discovery. | Similar to exchanges, operates a central limit order book, facilitating interaction between multiple third-party buying and selling interests. | Principal-based. The SI sets a quote against which clients trade. Price is derived from public markets. |
| Pre-Trade Transparency | Full transparency of bids, offers, and depths in the central limit order book. | High level of transparency, similar to public exchanges. Waivers may apply for certain order types (e.g. large-in-scale). | Mandatory public quoting up to a Standard Market Size (SMS). No pre-trade transparency required for orders above SMS. |
| Counterparty | Typically anonymous participants cleared through a central counterparty (CCP). | Multiple, often anonymous, third-party participants, usually cleared via a CCP. | The SI firm is the direct, principal counterparty to the trade. |
| Primary Use Case | Accessing central liquidity, price discovery, executing orders of all sizes. | Competing for order flow with primary exchanges, often with different fee structures or market models. | Executing client orders with potential for price improvement and reduced market impact, especially for retail and standardized institutional flow. |
| Impact on Liquidity | Consolidates liquidity, contributing to robust price discovery. | Fragments liquidity from the primary exchange but within a transparent, multilateral framework. | Diverts significant volume from lit venues, potentially thinning public market depth and widening spreads. |

![A sophisticated digital asset derivatives trading mechanism features a central processing hub with luminous blue accents, symbolizing an intelligence layer driving high fidelity execution. Transparent circular elements represent dynamic liquidity pools and a complex volatility surface, revealing market microstructure and atomic settlement via an advanced RFQ protocol](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-framework-optimizing-market-microstructure-price-discovery-intelligence-layer.jpg)

![Glossy, intersecting forms in beige, blue, and teal embody RFQ protocol efficiency, atomic settlement, and aggregated liquidity for institutional digital asset derivatives. The sleek design reflects high-fidelity execution, prime brokerage capabilities, and optimized order book dynamics for capital efficiency](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-digital-asset-derivatives-execution-via-optimized-rfq-protocols-enhancing-principal-operational-frameworks.jpg)

## Execution

The execution of orders within a market structure that includes Systematic Internalisers is a quantitative and operational discipline. It requires moving beyond strategic concepts to the precise mechanics of interaction and the measurement of outcomes. The decision to route an order to an SI or a public exchange has tangible, quantifiable consequences for execution quality. An effective execution framework must be built on a deep understanding of these consequences, supported by robust data analysis and a technological architecture capable of implementing nuanced routing decisions.

![A dark, precision-engineered module with raised circular elements integrates with a smooth beige housing. It signifies high-fidelity execution for institutional RFQ protocols, ensuring robust price discovery and capital efficiency in digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-system-core-high-speed-price-discovery-module.jpg)

## Quantitative Analysis of Execution Quality

The choice of venue directly impacts transaction costs. These costs can be deconstructed into two primary components ▴ the [liquidity impact](https://prime.greeks.live/question/what-are-the-specific-operational-challenges-of-managing-liquidity-in-a-liquidity-hub-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the [price impact](https://prime.greeks.live/area/price-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The liquidity impact represents the compensation earned by the liquidity provider for taking on the other side of the trade; it is the cost of immediacy. The price impact measures the adverse price movement caused by the trade itself, reflecting the information content of the order.

Academic research provides a granular view of these costs. For instance, a study of SI trading in OMXS 30 stocks revealed that the average effective cost for trades on SIs was 2.98 [basis points](https://prime.greeks.live/question/how-does-the-rfq-protocol-mitigate-adverse-selection-for-large-basis-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), compared to 2.86 basis points on public exchanges. While the overall cost appears similar, the composition is vastly different. For SI trades, the liquidity impact was 2.52 basis points (84.6% of the total cost), while the price impact was only 0.46 basis points (15.4%). For exchange trades, the pattern was inverted ▴ the liquidity impact was 0.82 basis points (28.6%), while the price impact was a substantial 2.04 basis points (71.4%).

> Executing trades in a fragmented market requires a quantitative approach to routing, balancing the explicit costs of liquidity against the implicit costs of market impact.

This data reveals the fundamental trade-off at the heart of the SI framework. Trading with an SI involves paying a higher direct cost to the liquidity provider (the SI firm), but it substantially reduces the indirect cost of the market moving against you. The SI internalizes the information content of the order, preventing it from propagating on the [public market](https://prime.greeks.live/question/could-excessive-dark-pool-trading-volume-destabilize-the-primary-public-exchanges/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

For an institutional trader whose primary concern is minimizing the signaling risk of a large order, this is a powerful value proposition. The following table breaks down these execution costs, illustrating the different economic realities of the two venue types.

| Metric (Basis Points) | Systematic Internaliser (SI) Trades | Public Exchange Trades | Interpretation |
| --- | --- | --- | --- |
| Average Effective Cost | 2.98 bps | 2.86 bps | The total explicit cost of execution is marginally higher on SIs. |
| Average Liquidity Impact | 2.52 bps (84.6% of cost) | 0.82 bps (28.6% of cost) | Represents the dealer’s spread; it is the primary cost component on SIs. |
| Average Price Impact | 0.46 bps (15.4% of cost) | 2.04 bps (71.4% of cost) | Represents adverse price movement; it is the dominant cost on public exchanges. |

_Source ▴ Adapted from analysis of SI trading in European markets. Data illustrates the composition of transaction costs._

![A precisely engineered multi-component structure, split to reveal its granular core, symbolizes the complex market microstructure of institutional digital asset derivatives. This visual metaphor represents the unbundling of multi-leg spreads, facilitating transparent price discovery and high-fidelity execution via RFQ protocols within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-protocols-revealing-market-microstructure-for-high-fidelity-execution-and-atomic-settlement-within-principals-operational-framework.jpg)

## How Does the Tick Size Regime Affect Execution?

A critical operational detail in the interaction between SIs and public exchanges is the [tick size regime](https://prime.greeks.live/area/tick-size-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). [Tick size](https://prime.greeks.live/area/tick-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) refers to the minimum price increment in which an instrument can be quoted. Initially, public exchanges were subject to a harmonized tick size regime under MiFID II, while SIs were not. This created an opportunity for SIs to offer price improvement by quoting at prices inside the public bid-ask spread, using finer increments than were permitted on the lit venues.

Research from the French regulator, the AMF, showed that nearly 40% of volumes traded on SIs were executed at prices that would not have been compliant with the exchange’s tick size regime. This ability to provide sub-tick price improvement was a significant competitive advantage for SIs in attracting order flow.

However, regulators moved to level the playing field. The extension of the tick size regime to SIs means that their quotes must now adhere to the same minimum price increments as those on public exchanges. This change directly curtails a major mechanism for price improvement.

While SIs can still offer better prices by quoting at the same price as the lit market but for a larger size, or by executing at the midpoint of the spread, the ability to marginally undercut the best bid or offer by a fraction of a tick has been removed. This regulatory harmonization forces competition between SIs and exchanges to shift towards other factors, such as speed of execution, certainty of execution, and the management of information leakage.

![A sleek, dark, metallic system component features a central circular mechanism with a radiating arm, symbolizing precision in High-Fidelity Execution. This intricate design suggests Atomic Settlement capabilities and Liquidity Aggregation via an advanced RFQ Protocol, optimizing Price Discovery within complex Market Microstructure and Order Book Dynamics on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-high-fidelity-execution-protocol-liquidity-market-microstructure.jpg)

## Operational Consequences for Public Liquidity

The diversion of substantial order flow to SIs has direct and observable consequences for the quality of liquidity on public exchanges. The primary concern, as articulated by market participants and regulators, is the depletion of liquidity from lit markets. When a large portion of the “uninformed” or less price-sensitive flow is executed off-exchange, the remaining flow on the lit market becomes more toxic for [market makers](https://prime.greeks.live/area/market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This has several operational effects:

- **Wider Spreads** ▴ Faced with a higher probability of trading against informed participants, market makers on public exchanges must widen their bid-ask spreads to compensate for the increased risk of adverse selection.

- **Reduced Depth** ▴ Market makers may also reduce the size of the orders they are willing to display on the lit book, leading to a decrease in the depth of market and the total volume of liquidity available at the best bid and offer.

- **Increased Volatility** ▴ Thinner markets can be more susceptible to price swings on smaller volumes, potentially leading to increased short-term volatility.

- **Impaired Price Discovery** ▴ While SI quotes are tethered to public market prices, the price discovery process itself is fueled by the interaction of a diverse range of orders on a central platform. Siphoning off a significant portion of that flow to bilateral venues can impair the efficiency and robustness of that process.

Executing a successful trading strategy in this environment requires an operational framework that acknowledges these realities. It means having the systems to not only access SI liquidity but also to continuously measure the health and quality of public market liquidity. The ultimate goal is to build a holistic view of the entire market ecosystem, making intelligent, data-driven decisions about where and how to place each order to achieve the optimal outcome according to the institution’s specific execution policy.

![Luminous teal indicator on a water-speckled digital asset interface. This signifies high-fidelity execution and algorithmic trading navigating market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-best-execution-prime-os.jpg)

## References

- Fischer, Artur, and David Murphy. “MiFID II and the relationship between public markets and systematic internalisers.” _Journal of Securities Operations & Custody_, vol. 9, no. 4, 2017, pp. 334-340.

- Gomber, Peter, et al. “Costs and Benefits of Trading with Electronic Stock Dealers ▴ The Case of Systematic Internalizers.” _Goethe University Frankfurt, Faculty of Economics and Business Administration_, 2016.

- Lucas, Iris. “Quantifying systematic internalisers’ activity ▴ their share in the equity market structure and role in the price discovery process.” _Autorité des marchés financiers (AMF)_, 2020.

- European Securities and Markets Authority. “MiFID II ▴ ESMA publishes data for the systematic internaliser calculations for equity, equity-like instruments and bonds.” _ESMA_, 2019.

- International Financial Law Review. “Mifid II ▴ how systematic internalisers threaten liquidity.” _IFLR_, 2018.

- UK Government, Foresight. “The impact of internalisation on the quality of displayed liquidity.” _GOV.UK_, 2012.

- European Securities and Markets Authority. “Final report on systematic internaliser ITS, volume cap and transparency calculations and trading venue RTS.” _ESMA_, 2025.

![Intersecting teal cylinders and flat bars, centered by a metallic sphere, abstractly depict an institutional RFQ protocol. This engine ensures high-fidelity execution for digital asset derivatives, optimizing market microstructure, atomic settlement, and price discovery across aggregated liquidity pools for Principal Market Makers](https://options.greeks.live/wp-content/uploads/2025/07/optimized-rfq-protocol-for-institutional-digital-asset-derivatives.jpg)

## Reflection

The analysis of the [Systematic Internaliser framework](https://prime.greeks.live/question/how-has-the-systematic-internaliser-regime-altered-liquidity-sourcing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) moves our focus from the trading desk to the architect’s office. The critical inquiry for your own operational framework becomes clear. Does your execution system merely react to the fragmented liquidity landscape, or does it possess the intelligence to command it? The data and mechanics reveal a market structure of parallel, interacting systems.

One system offers transparent price discovery, the other offers discretion and impact mitigation. True operational superiority is found in the design of a protocol that dynamically navigates both, treating them not as competing venues but as complementary components of a single, unified liquidity universe. The question to consider is how you transform your execution policy from a static map of destinations into an adaptive, intelligent engine that consistently delivers a quantifiable edge.

![An abstract geometric composition visualizes a sophisticated market microstructure for institutional digital asset derivatives. A central liquidity aggregation hub facilitates RFQ protocols and high-fidelity execution of multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/optimized-rfq-execution-framework-for-digital-asset-derivatives-trading.jpg)

## Glossary

<a href="https://prime.greeks.live/area/central-limit-order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered metallic tracks house a textured block with a central threaded aperture. This visualizes a core RFQ execution component within an institutional market microstructure, enabling private quotation for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-framework-precision-microstructure-component.jpg)

## Central Limit Order Book

Meaning ▴ A Central Limit Order Book is a digital repository that aggregates all outstanding buy and sell orders for a specific financial instrument, organized by price level and time of entry. </a><a href="https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, illuminated object, symbolizing an advanced RFQ protocol or Execution Management System, precisely intersects two broad surfaces representing liquidity pools within market microstructure. Its glowing line indicates high-fidelity execution and atomic settlement of digital asset derivatives, ensuring best execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principals-rfq-protocol-high-fidelity-execution-digital-asset-derivatives-market-microstructure-price-discovery-alpha-generation.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/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A spherical Liquidity Pool is bisected by a metallic diagonal bar, symbolizing an RFQ Protocol and its Market Microstructure. Imperfections on the bar represent Slippage challenges in High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-optimization-within-principals-market-microstructure-framework.jpg)

## Mifid Ii

Meaning ▴ MiFID II, the Markets in Financial Instruments Directive II, constitutes a comprehensive regulatory framework enacted by the European Union to govern financial markets, investment firms, and trading venues. </a><a href="https://prime.greeks.live/area/information-leakage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A blue speckled marble, symbolizing a precise block trade, rests centrally on a translucent bar, representing a robust RFQ protocol. This structured geometric arrangement illustrates complex market microstructure, enabling high-fidelity execution, optimal price discovery, and efficient liquidity aggregation within a principal's operational framework for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-institutional-rfq-execution-framework-optimizing-digital-asset-derivatives-liquidity-aggregation-across-complex-market-microstructure.jpg)

## Information Leakage

Meaning ▴ Information leakage denotes the unintended or unauthorized disclosure of sensitive trading data, often concerning an institution's pending orders, strategic positions, or execution intentions, to external market participants. </a><a href="https://prime.greeks.live/area/order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interconnected, sharp-edged geometric prisms on a dark surface reflect complex light. This embodies the intricate market microstructure of institutional digital asset derivatives, illustrating RFQ protocol aggregation for block trade execution, price discovery, and high-fidelity execution within a Principal's operational framework enabling optimal liquidity](https://options.greeks.live/wp-content/uploads/2025/07/precision-geometric-prisms-reflecting-institutional-digital-asset-derivatives-rfq-price-discovery-and-optimized-execution-market-microstructure.jpg)

## Order Book

Meaning ▴ An Order Book is a real-time electronic ledger detailing all outstanding buy and sell orders for a specific financial instrument, organized by price level and sorted by time priority within each level. </a><a href="https://prime.greeks.live/question/how-does-information-asymmetry-in-an-rfq-workflow-affect-the-price-discovery-process-for-illiquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, multi-component mechanism features a light upper segment meeting a darker, textured lower part. A diagonal bar pivots on a circular sensor, signifying High-Fidelity Execution and Price Discovery via RFQ Protocols for Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-execution-microstructure-for-optimal-price-discovery-and-atomic-settlement-with-prime-os-integration.jpg)

## Price Discovery Process

Information asymmetry in an RFQ for illiquid assets degrades price discovery by introducing uncertainty and risk, which dealers price into their quotes. </a><a href="https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting concrete structures symbolize the robust Market Microstructure underpinning Institutional Grade Digital Asset Derivatives. Dynamic spheres represent Liquidity Pools and Implied Volatility](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-framework-optimizing-rfq-execution-and-liquidity-for-principal-trading.jpg)

## Execution Quality

Meaning ▴ Execution Quality quantifies the efficacy of an order's fill, assessing how closely the achieved trade price aligns with the prevailing market price at submission, alongside consideration for speed, cost, and market impact. </a><a href="https://prime.greeks.live/question/what-regulatory-and-compliance-frameworks-govern-the-use-of-rfq-protocols-in-cross-exchange-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A stacked, multi-colored modular system representing an institutional digital asset derivatives platform. The top unit facilitates RFQ protocol initiation and dynamic price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-15.jpg)

## Public Exchange

A firm's compliance with RFQ regulations is achieved by architecting an auditable system that proves Best Execution for every trade. </a><a href="https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, futuristic object with a glowing line and intricate metallic core, symbolizing a Prime RFQ for institutional digital asset derivatives. It represents a sophisticated RFQ protocol engine enabling high-fidelity execution, liquidity aggregation, atomic settlement, and capital efficiency for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-protocol-execution-engine-for-optimal-liquidity-aggregation-and-atomic-settlement.jpg)

## Systematic Internalisers

Meaning ▴ A market participant, typically a broker-dealer, systematically executing client orders against its own inventory or other client orders off-exchange, acting as principal. </a><a href="https://prime.greeks.live/area/market-structure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract spheres and a sharp disc depict an Institutional Digital Asset Derivatives ecosystem. A central Principal's Operational Framework interacts with a Liquidity Pool via RFQ Protocol for High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-framework.jpg)

## Market Structure

Meaning ▴ Market structure defines the organizational and operational characteristics of a trading venue, encompassing participant types, order handling protocols, price discovery mechanisms, and information dissemination frameworks. </a><a href="https://prime.greeks.live/question/could-excessive-dark-pool-trading-volume-destabilize-the-primary-public-exchanges/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision metallic bars intersect above a dark circuit board, symbolizing RFQ protocols driving high-fidelity execution within market microstructure. This represents atomic settlement for institutional digital asset derivatives, enabling price discovery and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-precision-systemic-framework.jpg)

## Public Exchanges

Excessive dark pool volume can degrade public price discovery, creating a systemic feedback loop that undermines the stability of all markets. </a><a href="https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Angular teal and dark blue planes intersect, signifying disparate liquidity pools and market segments. A translucent central hub embodies an institutional RFQ protocol's intelligent matching engine, enabling high-fidelity execution and precise price discovery for digital asset derivatives, integral to a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-hub-for-market-microstructure.jpg)

## Price Improvement

Meaning ▴ Price improvement denotes the execution of a trade at a more advantageous price than the prevailing National Best Bid and Offer (NBBO) at the moment of order submission. </a><a href="https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting metallic structures symbolize RFQ protocol pathways for institutional digital asset derivatives. They represent high-fidelity execution of multi-leg spreads across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-framework-optimizing-multi-leg-spreads-and-liquidity-aggregation-for-best-execution.jpg)

## Order Flow

Meaning ▴ Order Flow represents the real-time sequence of executable buy and sell instructions transmitted to a trading venue, encapsulating the continuous interaction of market participants' supply and demand. </a><a href="https://prime.greeks.live/question/what-is-the-quantitative-impact-of-post-trade-transparency-on-bid-ask-spreads-in-interest-rate-swaps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic, disc-centric interface, likely a Crypto Derivatives OS, signifies high-fidelity execution for institutional-grade digital asset derivatives. Its grid implies algorithmic trading and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/rfq-block-price-algo-fidelity-alpha-capital-institutional-digital.jpg)

## Widen Their Bid-Ask Spreads

Post-trade transparency compresses standard swap spreads via competition while widening large trade spreads due to amplified dealer inventory risk. </a><a href="https://prime.greeks.live/area/adverse-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A gold-hued precision instrument with a dark, sharp interface engages a complex circuit board, symbolizing high-fidelity execution within institutional market microstructure. This visual metaphor represents a sophisticated RFQ protocol facilitating private quotation and atomic settlement for digital asset derivatives, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-precision-execution-engine-optimizing-digital-asset-derivatives-rfq-protocols-within-market-microstructure.jpg)

## Adverse Selection

Meaning ▴ Adverse selection describes a market condition characterized by information asymmetry, where one participant possesses superior or private knowledge compared to others, leading to transactional outcomes that disproportionately favor the informed party. </a><a href="https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Modular institutional-grade execution system components reveal luminous green data pathways, symbolizing high-fidelity cross-asset connectivity. This depicts intricate market microstructure facilitating RFQ protocol integration for atomic settlement of digital asset derivatives within a Principal's operational framework, underpinned by a Prime RFQ intelligence layer](https://options.greeks.live/wp-content/uploads/2025/07/modular-high-fidelity-execution-architecture-for-institutional-digital-asset-derivatives-rfq-protocol-integration-and-principals-operational-framework-optimization.jpg)

## Lit Market

Meaning ▴ A lit market is a trading venue providing mandatory pre-trade transparency. </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 precise, multi-layered disk embodies a dynamic Volatility Surface or deep Liquidity Pool for Digital Asset Derivatives. Dual metallic probes symbolize Algorithmic Trading and RFQ protocol inquiries, driving Price Discovery and High-Fidelity Execution of Multi-Leg Spreads within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-rfq-protocol-mechanism-for-digital-asset-derivatives-price-discovery-and-high-fidelity-execution-via-prime-os.jpg)

## Best Execution

Meaning ▴ Best Execution is the obligation to obtain the most favorable terms reasonably available for a client's order. </a><a href="https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Reflective and translucent discs overlap, symbolizing an RFQ protocol bridging market microstructure with institutional digital asset derivatives. This depicts seamless price discovery and high-fidelity execution, accessing latent liquidity for optimal atomic settlement within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-derivatives-rfq-execution-best-price-discovery.jpg)

## Market Impact

Meaning ▴ Market Impact refers to the observed change in an asset's price resulting from the execution of a trading order, primarily influenced by the order's size relative to available liquidity and prevailing market conditions. </a><a href="https://prime.greeks.live/area/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Visualizing a complex Institutional RFQ ecosystem, angular forms represent multi-leg spread execution pathways and dark liquidity integration. A sharp, precise point symbolizes high-fidelity execution for digital asset derivatives, highlighting atomic settlement within a Prime RFQ framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-1.jpg)

## Price Discovery

Meaning ▴ Price discovery is the continuous, dynamic process by which the market determines the fair value of an asset through the collective interaction of supply and demand. </a><a href="https://prime.greeks.live/question/what-are-the-specific-operational-challenges-of-managing-liquidity-in-a-liquidity-hub-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric structure with sharp angles and translucent planes, symbolizing institutional digital asset derivatives market microstructure. The central point signifies a core RFQ protocol engine, enabling precise price discovery and liquidity aggregation for multi-leg options strategies, crucial for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principals-operational-framework-optimizing-institutional-digital-asset-derivatives-rfq-protocol-execution-for-alpha-generation.jpg)

## Liquidity Impact

Managing a liquidity hub requires architecting a system that balances capital efficiency against the systemic risks of fragmentation and timing. </a><a href="https://prime.greeks.live/area/price-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated system's core component, representing an Execution Management System, drives a precise, luminous RFQ protocol beam. This beam navigates between balanced spheres symbolizing counterparties and intricate market microstructure, facilitating institutional digital asset derivatives trading, optimizing price discovery, and ensuring high-fidelity execution within a prime brokerage framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-10.jpg)

## Price Impact

Meaning ▴ Price Impact refers to the measurable change in an asset's market price directly attributable to the execution of a trade order, particularly when the order size is significant relative to available market liquidity. </a><a href="https://prime.greeks.live/question/how-does-the-rfq-protocol-mitigate-adverse-selection-for-large-basis-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interlocking transparent and opaque geometric planes on a dark surface. This abstract form visually articulates the intricate Market Microstructure of Institutional Digital Asset Derivatives, embodying High-Fidelity Execution through advanced RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/geometric-abstraction-of-institutional-digital-asset-derivatives-market-microstructure-driving-high-fidelity-execution-via-principal-rfq-protocols-and-optimal-liquidity-aggregation.jpg)

## Basis Points

The RFQ protocol mitigates adverse selection by replacing public order broadcast with a secure, private auction for targeted liquidity. </a><a href="https://prime.greeks.live/question/could-excessive-dark-pool-trading-volume-destabilize-the-primary-public-exchanges/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central rod, symbolizing an RFQ inquiry, links distinct liquidity pools and market makers. A transparent disc, an execution venue, facilitates price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-execution-optimization.jpg)

## Public Market

Excessive dark pool volume can degrade public price discovery, creating a systemic feedback loop that undermines the stability of all markets. </a><a href="https://prime.greeks.live/area/tick-size-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric planes delineate distinct institutional digital asset derivatives liquidity pools. Stark contrast signifies market microstructure shift via advanced RFQ protocols, ensuring high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-execution-protocol-integrating-rfq-liquidity-and-advanced-market-microstructure.jpg)

## Tick Size Regime

Meaning ▴ A Tick Size Regime specifies the minimum allowable price increment for an asset's quotation and trading, directly influencing order book granularity and the fundamental mechanics of price discovery within a defined market segment. </a><a href="https://prime.greeks.live/area/tick-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Metallic hub with radiating arms divides distinct quadrants. This abstractly depicts a Principal's operational framework for high-fidelity execution of institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-prime-os-market-microstructure.jpg)

## Tick Size

Meaning ▴ Tick Size defines the minimum permissible price increment for a financial instrument on an exchange, establishing the smallest unit by which a security's price can change or an order can be placed. </a><a href="https://prime.greeks.live/area/market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A reflective surface supports a sharp metallic element, stabilized by a sphere, alongside translucent teal prisms. This abstractly represents institutional-grade digital asset derivatives RFQ protocol price discovery within a Prime RFQ, emphasizing high-fidelity execution and liquidity pool optimization](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-prime-os-microstructure-optimization.jpg)

## Market Makers

Meaning ▴ Market Makers are financial entities that provide liquidity to a market by continuously quoting both a bid price (to buy) and an ask price (to sell) for a given financial instrument. </a><a href="https://prime.greeks.live/question/how-has-the-systematic-internaliser-regime-altered-liquidity-sourcing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent blue sphere is precisely centered within beige, dark, and teal channels. This depicts RFQ protocol for digital asset derivatives, enabling high-fidelity execution of a block trade within a controlled market microstructure, ensuring atomic settlement and price discovery on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-pathway-for-institutional-digital-asset-derivatives-leveraging-rfq-protocols-and-high-fidelity-market-microstructure.jpg)

## Systematic Internaliser Framework

The Systematic Internaliser regime structurally alters liquidity sourcing by creating a new, regulated bilateral venue for accessing dealer capital. </a>

**Tags:** [Off-Exchange Trading](https://options.greeks.live/area/off-exchange-trading/), [Market Makers](https://options.greeks.live/area/market-makers/), [Tick Size Regime](https://options.greeks.live/area/tick-size-regime/), [Order Flow](https://options.greeks.live/area/order-flow/), [Market Impact](https://options.greeks.live/area/market-impact/), [Adverse Selection](https://options.greeks.live/area/adverse-selection/)	

## Discover More

- 
### [How Does Anonymity in RFQ Systems Affect Quoting Behavior and Information Leakage?](https://options.greeks.live/question/how-does-anonymity-in-rfq-systems-affect-quoting-behavior-and-information-leakage/)
![A centralized intelligence layer for institutional digital asset derivatives, visually connected by translucent RFQ protocols. This Prime RFQ facilitates high-fidelity execution and private quotation for block trades, optimizing liquidity aggregation and price discovery. It ensures capital efficiency and systemic resilience within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-protocol-engine.jpg)

Anonymity in RFQ systems reshapes quoting by shifting focus from reputation to quantitative risk, reducing information leakage but increasing adverse selection risk.

- 
### [In What Ways Do Hybrid Execution Models Combine the Strengths of Both Clob and Rfq Protocols?](https://options.greeks.live/question/in-what-ways-do-hybrid-execution-models-combine-the-strengths-of-both-clob-and-rfq-protocols/)
![A sleek, abstract system interface with a central spherical lens representing real-time Price Discovery and Implied Volatility analysis for institutional Digital Asset Derivatives. Its precise contours signify High-Fidelity Execution and robust RFQ protocol orchestration, managing latent liquidity and minimizing slippage for optimized Alpha Generation.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-execution-via-optimized-rfq-protocols-enhancing-market-microstructure.jpg)

Hybrid execution models integrate CLOB transparency and RFQ discretion into a unified system for optimized liquidity sourcing.

- 
### [How Do Systematic Internalisers Affect Price Discovery on Primary Lit Exchanges?](https://options.greeks.live/question/how-do-systematic-internalisers-affect-price-discovery-on-primary-lit-exchanges/)
![A sleek, institutional-grade system processes a dynamic stream of market microstructure data, projecting a high-fidelity execution pathway for digital asset derivatives. This represents a private quotation RFQ protocol, optimizing price discovery and capital efficiency through an intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-digital-asset-derivatives-execution-microstructure-prime-os.jpg)

SIs impact price discovery by internalizing order flow, reducing the volume that informs public quotes on lit exchanges.

- 
### [Can Increased RFQ Utilization Lead to a More Fragmented or Less Transparent Market Structure Overall?](https://options.greeks.live/question/can-increased-rfq-utilization-lead-to-a-more-fragmented-or-less-transparent-market-structure-overall/)
![The abstract composition features a central, multi-layered blue structure representing a sophisticated institutional digital asset derivatives platform, flanked by two distinct liquidity pools. Intersecting blades symbolize high-fidelity execution pathways and algorithmic trading strategies, facilitating private quotation and block trade settlement within a market microstructure optimized for price discovery and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-1.jpg)

Increased RFQ use re-architects markets by trading public pre-trade transparency for controlled, large-scale liquidity discovery.

- 
### [How Do Systematic Internalisers and Dark Pools Fit into a Best Execution Framework under MiFID II?](https://options.greeks.live/question/how-do-systematic-internalisers-and-dark-pools-fit-into-a-best-execution-framework-under-mifid-ii/)
![Translucent rods, beige, teal, and blue, intersect on a dark surface, symbolizing multi-leg spread execution for digital asset derivatives. Nodes represent atomic settlement points within a Principal's operational framework, visualizing RFQ protocol aggregation, cross-asset liquidity streams, and optimized market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-aggregation-and-high-fidelity-execution.jpg)

Systematic Internalisers and Dark Pools are integral MiFID II components for managing market impact through distinct execution protocols.

- 
### [How Do Systematic Internalisers Benefit from the Double Volume Cap?](https://options.greeks.live/question/how-do-systematic-internalisers-benefit-from-the-double-volume-cap/)
![Stacked, multi-colored discs symbolize an institutional RFQ Protocol's layered architecture for Digital Asset Derivatives. This embodies a Prime RFQ enabling high-fidelity execution across diverse liquidity pools, optimizing multi-leg spread trading and capital efficiency within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-stack-for-high-fidelity-execution.jpg)

Systematic Internalisers benefit from the Double Volume Cap by capturing order flow displaced from restricted dark pools.

- 
### [How Did Mifid Ii Influence the Adoption of the Rfq Protocol in European Equity Markets?](https://options.greeks.live/question/how-did-mifid-ii-influence-the-adoption-of-the-rfq-protocol-in-european-equity-markets/)
![A central metallic RFQ engine anchors radiating segmented panels, symbolizing diverse liquidity pools and market segments. Varying shades denote distinct execution venues within the complex market microstructure, facilitating price discovery for institutional digital asset derivatives with minimal slippage and latency via high-fidelity execution.](https://options.greeks.live/wp-content/uploads/2025/07/principals-digital-asset-derivatives-rfq-protocol-execution-nexus.jpg)

MiFID II catalyzed RFQ adoption by constraining dark pools and formalizing SIs, making RFQ the prime protocol for compliant block liquidity.

- 
### [How Does Information Asymmetry Affect Strategic Choices in RFQ versus Lit Markets?](https://options.greeks.live/question/how-does-information-asymmetry-affect-strategic-choices-in-rfq-versus-lit-markets/)
![Abstract geometric design illustrating a central RFQ aggregation hub for institutional digital asset derivatives. Radiating lines symbolize high-fidelity execution via smart order routing across dark pools. Modular elements represent atomic settlement and capital efficiency within a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution-architecture.jpg)

Information asymmetry dictates the choice between lit markets (for speed) and RFQ (for discretion) to manage the cost of information leakage.

- 
### [What Are the Key Differences in Demonstrating Best Execution between Lit Markets and RFQ Protocols?](https://options.greeks.live/question/what-are-the-key-differences-in-demonstrating-best-execution-between-lit-markets-and-rfq-protocols/)
![A dark, articulated multi-leg spread structure crosses a simpler underlying asset bar on a teal Prime RFQ platform. This visualizes institutional digital asset derivatives execution, leveraging high-fidelity RFQ protocols for optimal capital efficiency and precise price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-prime-os-execution.jpg)

Demonstrating best execution is a function of protocol architecture; one requires forensic analysis of public data, the other requires procedural validation of a private auction.

---

## Raw Schema Data

```json
{
    "@context": "https://schema.org",
    "@type": "BreadcrumbList",
    "itemListElement": [
        {
            "@type": "ListItem",
            "position": 1,
            "name": "Home",
            "item": "https://options.greeks.live"
        },
        {
            "@type": "ListItem",
            "position": 2,
            "name": "Question",
            "item": "https://options.greeks.live/question/"
        },
        {
            "@type": "ListItem",
            "position": 3,
            "name": "How Does the SI Framework Impact Liquidity on Public Exchanges?",
            "item": "https://options.greeks.live/question/how-does-the-si-framework-impact-liquidity-on-public-exchanges/"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Organization",
    "@id": "https://greeks.live/#organization",
    "name": "Greeks.Live",
    "url": "https://greeks.live/",
    "description": "Greeks.live is the definitive toolkit for the professional options trader, dedicated to empowering our users with institutional-grade data, advanced analytics, and a comprehensive suite of trading tools designed to provide a decisive edge in the market. Every article and guide published under the Greeks.live name is a product of our deep commitment to data-driven analysis and our mission to support the global trading community.",
    "email": "support@greeks.live",
    "logo": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/Greeks.Live-Logo-Icon.svg"
    },
    "hasPart": [
        {
            "@type": "WebSite",
            "name": "About Us",
            "url": "https://about.greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "App Download Page",
            "url": "https://about.greeks.live/#/download/basic_trade"
        },
        {
            "@type": "WebSite",
            "name": "Newcomers' Guide",
            "url": "https://twisty-sign-c8b.notion.site/Guide-for-Greeks-live-X-Deribit-Newbies-5a08a3052822427d800af6eaf3704c8d"
        },
        {
            "@type": "WebSite",
            "name": "Knowledge Base",
            "url": "https://linktr.ee/greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "Option Terminology",
            "url": "https://greekslive.notion.site/88dfc00e7c584d4d8969b6302a79a12f?pvs=4"
        },
        {
            "@type": "WebSite",
            "name": "Terms of Service",
            "url": "https://greeks.live/#/tos"
        },
        {
            "@type": "WebSite",
            "name": "Disclaimer",
            "url": "https://greeks.live/#/disclaimer"
        }
    ],
    "sameAs": [
        "https://x.com/greekslive",
        "https://youtube.com/@greeks_live?si=-KjT0Lkw4WUCI0tD",
        "https://t.me/greekslive_notifications",
        "https://t.me/greekslive",
        "https://pinterest.com/greekslive/"
    ],
    "makesOffer": [
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "RFQ Platform",
                "url": "https://rfq.greeks.live",
                "description": "Execute institutional-grade block trades for crypto options and futures. This platform provides deep, over-the-counter (OTC) liquidity via a professional Request for Quote system.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Lending Tools",
                "url": "https://lend.greeks.live",
                "description": "Manage crypto lending and borrowing activities to earn yield or secure loans. This suite of tools helps users analyze interest rates and manage collateralized debt positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Data Lab",
                "url": "https://greeks.live/#/deribit/tools/datalab/BTC",
                "description": "Analyze historical and real-time options data with advanced metrics. This tool is designed for backtesting strategies and identifying market trends through comprehensive data visualization.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Profit & Loss Analysis (PnL)",
                "url": "https://greeks.live/#/deribit/tools/pnl_analysis",
                "description": "Track and analyze the Profit and Loss (PnL) of your options portfolio. This tool provides detailed performance metrics to help traders evaluate and refine their strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Position Visualization",
                "url": "https://greeks.live/#/deribit/tools/pv/BTC",
                "description": "Visualize complex options positions and their corresponding risk profiles. This tool generates payoff diagrams to help traders intuitively understand potential profit, loss, and exposure.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Options Calculator",
                "url": "https://greeks.live/#/deribit/tools/calculator",
                "description": "Calculate the theoretical price and risk parameters ('the Greeks') of crypto options. An essential tool for pricing new trades and analyzing the sensitivity of existing positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live Main Platform",
                "url": "https://greeks.live/",
                "description": "The central hub for the Greeks.live suite of professional cryptocurrency options and derivatives trading tools. Access analytics, manage positions, and explore the ecosystem.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Community Forum",
                "url": "https://t.greeks.live",
                "description": "Join the official Greeks.live community. Connect with other traders, share insights, and receive the latest updates directly from the team.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for Deribit",
                "url": "http://deribit.greeks.live",
                "description": "A dedicated interface for trading on the Deribit exchange. This platform leverages Greeks.live's advanced analytics and tools specifically for users of Deribit's options and futures markets.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for OKX",
                "url": "http://okx.greeks.live",
                "description": "A dedicated interface for trading on the OKX exchange. This platform integrates Greeks.live's powerful analytics with the OKX marketplace, focusing on its options and derivatives products.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "GLVS.AI Trading Platform",
                "url": "https://www.glvs.ai/",
                "description": "An AI-powered platform for automated crypto options trading. Leverage advanced algorithms and data-driven signals to develop and deploy sophisticated, hands-free trading strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "API Testnet & Sandbox",
                "url": "https://test.greeks.live",
                "description": "A dedicated testnet environment for developers to test their API integrations and automated trading strategies. This sandbox allows for full functionality testing without risking real funds.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        }
    ],
    "subOrganization": [
        {
            "@type": "Organization",
            "name": "GreeksLive HK Co., Limited",
            "email": "support@greeks.live",
            "telephone": "+852-56418949",
            "address": {
                "@type": "PostalAddress",
                "streetAddress": "Unit 11, 27/F, K. Wah Centre, 191 Java Road",
                "addressLocality": "Hong Kong",
                "addressRegion": "North Point",
                "addressCountry": "CN",
                "postalCode": "0000"
            },
            "geo": {
                "@type": "GeoCoordinates",
                "latitude": "22.2932357",
                "longitude": "114.2022026"
            },
            "image": "https://options.greeks.live/wp-content/uploads/2025/08/Wah-Centre-Hong-Kong.jpg"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Article",
    "mainEntityOfPage": {
        "@type": "WebPage",
        "@id": "https://options.greeks.live/question/how-does-the-si-framework-impact-liquidity-on-public-exchanges/"
    },
    "headline": "How Does the SI Framework Impact Liquidity on Public Exchanges? \u25b4 Question",
    "description": "The SI framework bifurcates liquidity, offering reduced price impact at the potential cost of diminished public market depth. \u25b4 Question",
    "url": "https://options.greeks.live/question/how-does-the-si-framework-impact-liquidity-on-public-exchanges/",
    "datePublished": "2025-08-01T14:38:45+00:00",
    "dateModified": "2025-08-01T14:38:46+00:00",
    "articleSection": [
        "Question"
    ],
    "author": {
        "@id": "https://greeks.live/#organization"
    },
    "publisher": {
        "@id": "https://greeks.live/#organization"
    },
    "image": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-10.jpg",
        "caption": "An advanced institutional trading engine, signifying a Prime RFQ, precisely emits an RFQ protocol data stream, symbolizing atomic settlement for digital asset derivatives. This intelligence layer navigates complex market microstructure and latent liquidity between market makers, enabling optimal price discovery and capital efficiency for block trades. It underscores a commitment to best execution and reduced slippage for sophisticated portfolio margin strategies, reflecting systemic risk mitigation."
    },
    "keywords": [
        "Adverse Selection",
        "Best Execution",
        "Central Limit Order Book",
        "Execution Quality",
        "Information Leakage",
        "Limit Order",
        "Limit Order Book",
        "Liquidity Fragmentation",
        "Lit Market",
        "Market Impact",
        "Market Makers",
        "Market Microstructure",
        "Market Structure",
        "MiFID II",
        "Off-Exchange Trading",
        "Order Book",
        "Order Flow",
        "Price Discovery",
        "Price Impact",
        "Price Improvement",
        "Principal Trading",
        "Smart Order Routing",
        "Systematic Internaliser",
        "Systematic Internalisers",
        "Tick Size",
        "Tick Size Regime"
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "WebSite",
    "url": "https://options.greeks.live/",
    "potentialAction": {
        "@type": "SearchAction",
        "target": "https://options.greeks.live/?s=search_term_string",
        "query-input": "required name=search_term_string"
    }
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "FAQPage",
    "mainEntity": [
        {
            "@type": "Question",
            "name": "What Is The Optimal Routing Strategy?",
            "acceptedAnswer": {
                "@type": "Answer",
                "text": "There is no single static answer. The optimal strategy is dynamic and depends on the order's size, the security's liquidity profile, and the institution's own risk tolerance for market impact versus information leakage. MiFID II's best execution mandate requires firms to take all sufficient steps to obtain the best possible result for their clients, considering price, costs, speed, likelihood of execution, and size. This explicitly compels firms to look beyond the lit book and build a process that can access and evaluate SI liquidity. A robust strategic framework involves several components:"
            }
        },
        {
            "@type": "Question",
            "name": "How Does The Tick Size Regime Affect Execution?",
            "acceptedAnswer": {
                "@type": "Answer",
                "text": "A critical operational detail in the interaction between SIs and public exchanges is the tick size regime. Tick size refers to the minimum price increment in which an instrument can be quoted. Initially, public exchanges were subject to a harmonized tick size regime under MiFID II, while SIs were not. This created an opportunity for SIs to offer price improvement by quoting at prices inside the public bid-ask spread, using finer increments than were permitted on the lit venues. Research from the French regulator, the AMF, showed that nearly 40% of volumes traded on SIs were executed at prices that would not have been compliant with the exchange's tick size regime. This ability to provide sub-tick price improvement was a significant competitive advantage for SIs in attracting order flow."
            }
        }
    ]
}
```


---

**Original URL:** https://options.greeks.live/question/how-does-the-si-framework-impact-liquidity-on-public-exchanges/
