# How Does the SI Quoting Obligation Vary between Liquid and Illiquid Instruments? ▴ Question

**Published:** 2025-08-02
**Categories:** Question

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## Concept

The distinction in quoting obligations for a [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SI) under the Markets in Financial Instruments Directive II (MiFID II) is a direct function of an instrument’s liquidity profile. This regulatory architecture is designed to calibrate transparency requirements to the realities of market depth and price formation. For instruments classified as liquid, the market structure can support, and benefits from, continuous [pre-trade transparency](https://prime.greeks.live/area/pre-trade-transparency/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Consequently, an SI is mandated to provide firm, two-way quotes on a regular and continuous basis.

This obligation creates a source of reliable, executable prices that contributes to the public price discovery process. The underlying principle is that for a liquid asset, a constant stream of quotes from a major market participant like an SI enhances market quality and provides a benchmark for all participants.

Conversely, for instruments deemed illiquid, the market dynamics are fundamentally different. A lack of consistent trading activity means that continuous, firm quoting would be economically unviable and potentially destabilizing for the quoting entity. Forcing an SI to publish firm prices in a market with sparse data points and wide spreads would expose it to significant adverse selection risk. The regulatory framework acknowledges this by shifting the obligation from continuous public disclosure to a more circumscribed, on-demand model.

For [illiquid instruments](https://prime.greeks.live/area/illiquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), an SI must disclose quotes to its clients upon request. This approach provides necessary liquidity to clients seeking to transact without imposing a mandate that would be unsustainable in a thin market. The system is engineered to provide targeted transparency where it is most needed ▴ to the client initiating a trade ▴ while protecting the liquidity provider from the inherent risks of quoting in an illiquid environment.

> The core of the Systematic Internaliser framework is to tailor transparency obligations to the specific liquidity characteristics of each financial instrument, balancing market integrity with the practicalities of risk management.

This bifurcation is central to the [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) objective of capturing over-the-counter (OTC) activity within a regulated and transparent framework. The SI regime effectively creates a hybrid model that sits between a public exchange and a purely bilateral OTC transaction. It formalizes the role of large investment firms that frequently execute client orders on their own account, compelling them to contribute to market transparency in a manner that is proportional to the liquidity of the instrument being traded. The obligation for [liquid instruments](https://prime.greeks.live/area/liquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is public and continuous, serving the market as a whole.

The obligation for illiquid instruments is private and reactive, serving the specific needs of the client. This dual structure is a deliberate piece of market engineering designed to enhance price discovery where possible and facilitate it where necessary, all while acknowledging the commercial and risk-based realities faced by major liquidity providers.

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## Defining the Systematic Internaliser

A Systematic Internaliser is an investment firm that, on an organized, frequent, systematic, and substantial basis, deals on its own account when executing client orders outside of a regulated market, a Multilateral Trading Facility (MTF), or an Organised Trading Facility (OTF). This definition is critical. The SI is not a venue; it is a counterparty. It operates a bilateral trading system, using its own capital to complete client trades.

The purpose of the SI designation is to bring a significant portion of this bilateral, off-venue trading into a more transparent regulatory perimeter. The regime recognizes that when firms internalize a large volume of client order flow, they become a de facto market center, and their activity has a material impact on overall price formation.

The criteria for becoming an SI are quantitative and assessed on an instrument-by-instrument basis. A firm must assess its trading activity against thresholds set by regulators to determine if it meets the “frequent, systematic, and substantial” tests. If a firm crosses these thresholds for a particular instrument, it is obligated to register as an SI for that instrument and assume the corresponding quoting and reporting duties. Firms can also voluntarily “opt-in” to the SI regime for certain instruments, which can be a strategic decision to signal market-making intent and provide clients with a clear, regulated execution channel.

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## The Critical Role of Liquidity Classification

The entire edifice of the SI [quoting obligation](https://prime.greeks.live/area/quoting-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) rests on the classification of financial instruments as either liquid or illiquid. This determination is not left to the discretion of the SI; it is made through a formal, data-driven process managed by the European Securities and Markets Authority (ESMA). ESMA performs regular assessments based on quantitative criteria, such as the average daily number of trades and the average daily notional amount traded. The results of these liquidity assessments are made public, creating a definitive and universally applicable classification for each instrument.

For equities and similar instruments, the key metric is the free float velocity and the average daily number of transactions. For non-equity instruments like bonds and derivatives, the assessment is more complex, taking into account the specific characteristics of each instrument class. The outcome of this classification directly dictates the nature of the quoting obligation an SI must fulfill.

An instrument’s designation as liquid triggers the stringent requirement for continuous, public, firm quotes. A designation as illiquid triggers the more flexible, on-request quoting obligation.

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## Strategy

The strategic decision-making process for an investment firm operating within the Systematic Internaliser regime is a complex exercise in balancing regulatory obligations, commercial opportunities, and [risk management](https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The variance in quoting duties between liquid and illiquid instruments is not merely a compliance footnote; it is a fundamental driver of business strategy. Firms must architect their trading infrastructure, client engagement models, and risk systems around these divergent requirements. The choice to become an SI, whether by obligation or voluntarily, is a commitment to a specific market-making posture, and the strategy for monetizing that posture is dictated by the liquidity profile of the instruments traded.

For liquid instruments, the strategy centers on efficiency, scale, and competitive pricing. The obligation to provide continuous, firm, two-way quotes places the SI in direct competition with public exchanges and other SIs. The strategic imperative is to build a highly automated system capable of managing a constant stream of quotes that are attractive to clients while reflecting [prevailing market conditions](https://prime.greeks.live/area/prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This involves sophisticated auto-pricing engines, low-latency connectivity, and robust risk management systems that can handle a high volume of small-to-medium-sized trades.

The commercial benefit is derived from capturing a large volume of order flow, earning the bid-ask spread, and potentially leveraging the information content of that flow for other trading activities. The public nature of the quotes also serves as a marketing tool, signaling the firm’s commitment and capacity in specific instruments.

> An SI’s strategy for liquid instruments is a high-volume, technology-driven game of spread capture, whereas the strategy for illiquid instruments is a high-touch, relationship-based approach focused on facilitating difficult trades.

In the realm of illiquid instruments, the strategic focus shifts dramatically from high-volume automation to high-touch service and risk warehousing. The quoting obligation is triggered by a [client request](https://prime.greeks.live/question/how-might-the-growth-of-all-to-all-rfq-models-change-the-traditional-dealer-client-relationship/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), transforming the interaction from a passive, continuous broadcast to an active, bilateral negotiation. Here, the SI’s value proposition is its ability to price and absorb risk in markets where few others can or will. The strategy involves cultivating deep client relationships, developing specialized expertise in niche asset classes, and maintaining a capital base sufficient to warehouse the risk of large, infrequent trades.

The profit potential is higher on a per-trade basis, reflecting the higher risk and specialized service, but the overall trade volume is significantly lower. The strategic challenge is managing inventory risk and avoiding adverse selection from well-informed clients.

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## Architecting the Quoting Infrastructure

A firm’s technology and operational build must be tailored to the specific [quoting obligations](https://prime.greeks.live/area/quoting-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). A unified system may handle both liquid and illiquid flows, but the internal logic and workflows will be distinct.

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## Liquid Instrument Quoting Systems

For liquid assets, the system must be designed for continuous, high-frequency operations. Key components include:

- **Pricing Engine** ▴ This module must continuously consume market data from reference venues to generate quotes that are competitive and reflect “[prevailing market](https://prime.greeks.live/question/how-does-the-proliferation-of-last-look-affect-overall-price-discovery-and-market-stability-in-the-fx-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) conditions” as required by the regulation. It incorporates the firm’s desired spread, inventory position, and risk limits.

- **Quote Dissemination** ▴ The infrastructure must support the publication of firm quotes to the public via appropriate channels, such as an [Approved Publication Arrangement](https://prime.greeks.live/area/approved-publication-arrangement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (APA). This requires reliable, low-latency messaging capabilities.

- **Order Execution and Risk Management** ▴ When a client hits a quote, the system must execute the trade instantly, update the firm’s risk position, and adjust subsequent quotes accordingly. Pre-trade risk checks are automated to ensure that quote sizes and exposures remain within defined limits.

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## Illiquid Instrument Quoting Systems

For illiquid assets, the system supports a more manual, trader-centric workflow. Key components include:

- **Client Request Workflow** ▴ The system must efficiently route a client’s [request for quote](https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (RFQ) to the appropriate trading desk or specialist. This workflow must be logged and auditable.

- **Trader Pricing Tools** ▴ Traders require sophisticated tools to price illiquid instruments. These tools may incorporate various data sources, internal models, and historical trade data to arrive at a defensible price.

- **Quote Disclosure to Clients** ▴ The system must allow the trader to securely and privately disclose the quote to the requesting client. The terms of the quote, including its duration, must be clearly communicated. Execution is a deliberate, bilateral process.

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## Comparative Analysis of Quoting Obligations

The strategic implications become clearer when the obligations are laid out side-by-side. The following table provides a structured comparison of the core quoting requirements under the MiFID II SI regime.

| Obligation Parameter | Liquid Instruments | Illiquid Instruments |
| --- | --- | --- |
| Triggering Event | Continuous obligation during normal trading hours. | Upon receipt of a client request for a quote. |
| Nature of Quote | Firm, two-way quotes (bid and ask). | Disclosure of a quote, which can be one-way or two-way. |
| Recipient of Quote | Made public to all clients and the market. | Disclosed privately to the requesting client(s). |
| Quote Size | Must be for a size up to the Standard Market Size (SMS), with a minimum of 10% of SMS for equities. | Determined by the SI, often based on the client’s request and the SI’s risk appetite. |
| Pricing Basis | Must reflect “prevailing market conditions” from the most liquid trading venue. | Based on the SI’s commercial policy and assessment of risk, must be fair to the client. |
| Update Frequency | Can be updated at any time to reflect changing market conditions. | Quotes are typically provided with a specific validity period. |

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## Execution

The operational execution of Systematic Internaliser quoting obligations requires a sophisticated and robust technological and compliance framework. The divergence in requirements for liquid and illiquid instruments necessitates two distinct, albeit interconnected, operational playbooks. For liquid instruments, the focus is on automated, high-throughput processing and public data dissemination.

For illiquid instruments, the process is defined by controlled, auditable workflows for bilateral communication and risk assessment. Successfully executing these obligations is a matter of integrating market data, pricing logic, risk management, and regulatory reporting into a seamless, resilient system.

At the core of the execution framework is the instrument’s liquidity status, which acts as a routing switch for the entire operational flow. Upon receiving an order or a request for quote, the firm’s systems must first identify the instrument and query its liquidity classification based on the latest ESMA data. This initial check dictates which set of rules and obligations applies.

A misclassification can lead to a direct regulatory breach, such as failing to provide a public quote for a liquid instrument or improperly disseminating a quote for an illiquid one. Therefore, the maintenance of an accurate and up-to-date internal database of instrument liquidity is a foundational operational requirement.

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## Operational Playbook for Liquid Instruments

The execution of quoting obligations for liquid instruments is a continuous, automated process. The primary objective is to maintain a constant presence in the market with competitive, firm quotes while managing the associated risk.

- **Data Ingestion and Normalization** ▴ The system continuously ingests real-time market data from the designated reference venue for the instrument. This data includes the current bid-ask spread, traded volumes, and order book depth. The data must be normalized to a standard format for use by the pricing engine.

- **Automated Price Generation** ▴ The pricing engine calculates the SI’s bid and ask prices. This calculation is a function of the reference price from the lit market, to which the SI applies its own predetermined spread. The spread itself can be dynamic, adjusted by algorithms based on factors like market volatility, the SI’s current inventory position, and perceived order flow toxicity. The generated quotes must be “close in price” to the reference market, as stipulated by regulation.

- **Pre-Trade Risk and Compliance Checks** ▴ Before a quote is published, it undergoes a series of automated checks. These include ensuring the quote size is within the mandated range (e.g. between 10% and 100% of [Standard Market Size](https://prime.greeks.live/area/standard-market-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for equities) and that the potential execution would not breach the firm’s internal risk limits.

- **Quote Publication** ▴ Once cleared, the two-way quote is electronically published via an Approved [Publication Arrangement](https://prime.greeks.live/question/how-do-approved-publication-arrangements-ensure-the-integrity-of-post-trade-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (APA). This makes the quote publicly available, ensuring pre-trade transparency. The publication message must contain all required data fields, including the instrument identifier, price, size, and the SI’s identity.

- **Execution and [Post-Trade Reporting](https://prime.greeks.live/area/post-trade-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ When a client executes against the published quote, the trade is processed straight-through. The SI is then responsible for the public post-trade reporting of the transaction, typically also through an APA. This report must be made as close to real-time as possible. The SI must inform the counterparty that it is handling the reporting obligation to prevent duplicate reports.

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## Operational Playbook for Illiquid Instruments

The workflow for illiquid instruments is event-driven and centered around the trading desk. The process prioritizes risk management and client-specific communication over automated public dissemination.

- **Client Request for Quote (RFQ) Receipt** ▴ The process begins when a client submits an RFQ, typically through an electronic platform or directly to a sales trader. The system must log the request, including the client’s identity, the instrument, and the desired size.

- **Trader Pricing and Risk Assessment** ▴ The RFQ is routed to the trader specializing in that asset class. The trader uses a combination of pricing models, comparable instrument analysis, and market intelligence to construct a quote. A key part of this process is assessing the risk of the potential trade, including the difficulty of hedging the position and the capital commitment required.

- **Quote Disclosure** ▴ The trader provides the quote directly and privately to the client. This is a critical distinction from the liquid instrument workflow. The quote is not made public. The communication must be secure and recorded for compliance purposes. The quote will have a specified lifetime (e.g. valid for 30 seconds).

- **Execution and Confirmation** ▴ If the client accepts the quote within its validity period, the trade is executed. The trader confirms the execution, and the position is booked into the firm’s risk systems.

- **Post-Trade Reporting** ▴ Similar to liquid instruments, the SI is responsible for post-trade public reporting of the transaction. However, for illiquid instruments, there are often provisions that allow for delayed publication to mitigate the risk of market impact from the disclosure of a large or sensitive trade. The SI must still report the trade to the regulator in a timely manner.

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## Post-Trade Transparency Obligations

While distinct from pre-trade quoting, post-trade reporting is an integral part of the SI’s execution responsibilities and varies with liquidity. The following table details the key post-trade transparency requirements.

| Reporting Parameter | Liquid Instruments | Illiquid Instruments |
| --- | --- | --- |
| Reporting Responsibility | The SI is responsible for making the trade public. | The SI is responsible for making the trade public. |
| Reporting Timeliness | As close to real-time as technically possible. | May be eligible for deferred publication based on instrument type and trade size. |
| Publication Venue | Via an Approved Publication Arrangement (APA). | Via an Approved Publication Arrangement (APA). |
| Information Disclosed | Includes instrument identifier, price, volume, time of trade, and venue (SI’s identifier). | Includes the same information, but the publication may be delayed and potentially aggregated. |
| Waivers | Waivers for pre-trade quoting do not apply, but post-trade deferrals can be used for large-in-scale trades. | Eligible for both pre-trade quoting waivers (by definition) and post-trade publication deferrals. |

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## What Are the Implications of the Tick Size Regime?

A significant point of contention in the execution of SI quoting has been the application of the [tick size regime](https://prime.greeks.live/area/tick-size-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). For trading venues, there is a harmonized tick size regime that dictates the minimum price increments for quotes. Initially, SIs were not strictly bound by this regime, needing only to ensure their quotes reflected “prevailing [market conditions](https://prime.greeks.live/question/in-what-market-conditions-should-a-waterfall-rfq-protocol-be-deployed-over-a-simultaneous-one/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” This created a potential advantage for SIs, as they could offer price improvement at increments smaller than one tick, a practice known as sub-tick pricing.

Regulators have moved to level the playing field, increasingly requiring SI quotes to adhere to the same [tick size](https://prime.greeks.live/area/tick-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) increments as trading venues, particularly when not providing meaningful price improvement. This ensures that SIs cannot systematically undercut exchanges by infinitesimally small amounts, thereby preserving the integrity of the public price formation process on lit markets.

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## References

- Deutsche Bank AG. “MiFID II ▴ Systematic Internalisers ▴ Tick Sizes and Price Improvement – Deutsche Bank Autobahn.” 2017.

- BaFin. “Systematic internalisers ▴ Main points of the new supervisory regime under MiFID II.” 2017.

- “MiFID II ▴ Are you a systematic internaliser?” 2024.

- International Capital Market Association. “MiFID II implementation ▴ the Systematic Internaliser regime.” 2017.

- “Systematic internaliser (SI) in MiFID II – a counterparty, not a trading venue.” 2014.

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## Reflection

The intricate design of the Systematic Internaliser framework prompts a deeper consideration of a firm’s market-facing identity. The regulations compel a conscious choice ▴ is the firm’s primary function to be a high-volume, low-latency processor of liquid flow, or a specialized, risk-absorbing partner for illiquid transactions? While it is possible to be both, the operational, technological, and cultural requirements for each are distinct. Reflecting on this regulatory bifurcation allows a firm to assess the alignment of its infrastructure with its strategic intent.

Is the current system architecture a true reflection of the firm’s desired role in the market, or is it a patchwork of legacy systems reacting to regulatory mandates? The quoting obligation, in its dual nature, provides a clear lens through which to examine and refine the core of a firm’s execution philosophy.

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## 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">
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## 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">
![A specialized hardware component, showcasing a robust metallic heat sink and intricate circuit board, symbolizes a Prime RFQ dedicated hardware module for institutional digital asset derivatives. It embodies market microstructure enabling high-fidelity execution via RFQ protocols for block trade and multi-leg spread](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-dedicated-hardware-for-institutional-rfq-execution.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/area/illiquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, spherical intelligence layer component with internal blue mechanics and a precision lens. It embodies a Principal's private quotation system, driving high-fidelity execution and price discovery for digital asset derivatives through RFQ protocols, optimizing market microstructure and minimizing latency](https://options.greeks.live/wp-content/uploads/2025/08/principals-private-quotation-system-intelligence-layer-component.jpg)

## Illiquid Instruments

Meaning ▴ Illiquid instruments denote financial assets or securities that cannot be readily converted into cash without incurring a significant loss in value due to an absence of a robust, active trading market. </a><a href="https://prime.greeks.live/area/liquid-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, pointed object, merging light and dark modular components, embodies advanced market microstructure for digital asset derivatives. Its precise form represents high-fidelity execution, price discovery via RFQ protocols, emphasizing capital efficiency, institutional grade alpha generation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-rfq-execution-system-microstructure.jpg)

## Liquid Instruments

Meaning ▴ Liquid Instruments are financial contracts or assets characterized by their capacity to be traded swiftly and efficiently at prices closely approximating their intrinsic value, exhibiting minimal market impact and tight bid-ask spreads even for substantial transaction sizes. </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">
![Sleek, futuristic metallic components showcase a dark, reflective dome encircled by a textured ring, representing a Volatility Surface for Digital Asset Derivatives. This Prime RFQ architecture enables High-Fidelity Execution and Private Quotation via RFQ Protocols for Block Trade liquidity](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-platform-architecture-for-high-fidelity-rfq-protocol-execution-and-price-discovery.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/quoting-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract digital interface features a dark circular screen with two luminous dots, one teal and one grey, symbolizing active and pending private quotation statuses within an RFQ protocol. Below, sharp parallel lines in black, beige, and grey delineate distinct liquidity pools and execution pathways for multi-leg spread strategies, reflecting market microstructure and high-fidelity execution for institutional grade digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-displaying-multi-leg-execution-status-and-optimal-liquidity-pathways.jpg)

## Quoting Obligation

Meaning ▴ A Quoting Obligation represents a formal requirement for a market participant, typically a designated market maker or liquidity provider, to continuously offer bid and ask prices for a specified financial instrument. </a><a href="https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision mechanism with a central circular core and a linear element extending to a sharp tip, encased in translucent material. This symbolizes an institutional RFQ protocol's market microstructure, enabling high-fidelity execution and price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-execution-engine-microstructure-facilitating-optimal-price-discovery-and-best-execution.jpg)

## Risk Management

Meaning ▴ Risk Management is the systematic process of identifying, assessing, and mitigating potential financial exposures and operational vulnerabilities within an institutional trading framework. </a><a href="https://prime.greeks.live/area/prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision instruments, resembling calibration tools, intersect over a central geared mechanism. This metaphor illustrates the intricate market microstructure and price discovery for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-engine-microstructure-analytics.jpg)

## Prevailing Market Conditions

Meaning ▴ Prevailing Market Conditions refers to the aggregate, real-time state of quantitative and qualitative factors influencing asset valuation and transaction dynamics within a specific market segment, encompassing elements such as liquidity, volatility, order book depth, bid-ask spreads, and relevant macroeconomic indicators. </a><a href="https://prime.greeks.live/question/how-might-the-growth-of-all-to-all-rfq-models-change-the-traditional-dealer-client-relationship/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Close-up reveals robust metallic components of an institutional-grade execution management system. Precision-engineered surfaces and central pivot signify high-fidelity execution for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-execution-precision-optimizing-market-microstructure-for-best-execution-and-prime-os.jpg)

## Client Request

All-to-all RFQ models transmute the dealer-client dyad into a networked liquidity ecosystem, privileging systemic integration over bilateral relationships. </a><a href="https://prime.greeks.live/area/quoting-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Brushed metallic and colored modular components represent an institutional-grade Prime RFQ facilitating RFQ protocols for digital asset derivatives. The precise engineering signifies high-fidelity execution, atomic settlement, and capital efficiency within a sophisticated market microstructure for multi-leg spread trading](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-system.jpg)

## Quoting Obligations

Meaning ▴ Quoting Obligations define the mandated responsibility of a market participant, typically a designated market maker or liquidity provider, to continuously display two-sided prices, bid and offer, for a specified digital asset derivative. </a><a href="https://prime.greeks.live/question/how-does-the-proliferation-of-last-look-affect-overall-price-discovery-and-market-stability-in-the-fx-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, disc-shaped system, with concentric rings and a central dome, visually represents an advanced Principal's operational framework. It integrates RFQ protocols for institutional digital asset derivatives, facilitating liquidity aggregation, high-fidelity execution, and real-time risk management](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-digital-asset-derivatives-execution.jpg)

## Prevailing Market

Last look re-architects FX execution by granting liquidity providers a risk-management option that reshapes price discovery and market stability. </a><a href="https://prime.greeks.live/area/approved-publication-arrangement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek metallic and translucent teal forms intersect, representing institutional digital asset derivatives and high-fidelity execution. Concentric rings symbolize dynamic volatility surfaces and deep liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/optimized-institutional-digital-asset-derivatives-rfq-protocols-microstructure.jpg)

## Approved Publication Arrangement

Meaning ▴ An Approved Publication Arrangement (APA) is a regulated entity authorized to publicly disseminate post-trade transparency data for financial instruments, as mandated by regulations such as MiFID II and MiFIR. </a><a href="https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated metallic mechanism with integrated translucent teal pathways on a dark background. This abstract visualizes the intricate market microstructure of an institutional digital asset derivatives platform, specifically the RFQ engine facilitating private quotation and block trade execution](https://options.greeks.live/wp-content/uploads/2025/07/systemic-framework-for-institutional-digital-asset-derivatives-rfq-price-discovery-and-atomic-settlement.jpg)

## Request for Quote

Meaning ▴ A Request for Quote, or RFQ, constitutes a formal communication initiated by a potential buyer or seller to solicit price quotations for a specified financial instrument or block of instruments from one or more liquidity providers. </a><a href="https://prime.greeks.live/area/standard-market-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![This visual represents an advanced Principal's operational framework for institutional digital asset derivatives. A foundational liquidity pool seamlessly integrates dark pool capabilities for block trades](https://options.greeks.live/wp-content/uploads/2025/07/principal-crypto-derivatives-os-rfq-execution-microstructure.jpg)

## Standard Market Size

Meaning ▴ The Standard Market Size defines a pre-calibrated notional or unit quantity for an order, representing a typical transaction volume for a specific digital asset derivative instrument on a given venue. </a><a href="https://prime.greeks.live/question/how-do-approved-publication-arrangements-ensure-the-integrity-of-post-trade-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Institutional-grade infrastructure supports a translucent circular interface, displaying real-time market microstructure for digital asset derivatives price discovery. Geometric forms symbolize precise RFQ protocol execution, enabling high-fidelity multi-leg spread trading, optimizing capital efficiency and mitigating systemic risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-request-for-quote-protocol-high-fidelity-execution-market-microstructure-intelligence-layer.jpg)

## Publication Arrangement

APAs architect market integrity by validating and publishing post-trade data, creating a single, verifiable source of truth for all participants. </a><a href="https://prime.greeks.live/area/post-trade-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

## Post-Trade Reporting

Meaning ▴ Post-Trade Reporting refers to the mandatory disclosure of executed trade details to designated regulatory bodies or public dissemination venues, ensuring transparency and market surveillance. </a><a href="https://prime.greeks.live/question/in-what-market-conditions-should-a-waterfall-rfq-protocol-be-deployed-over-a-simultaneous-one/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark blue, precision-engineered blade-like instrument, representing a digital asset derivative or multi-leg spread, rests on a light foundational block, symbolizing a private quotation or block trade. This structure intersects robust teal market infrastructure rails, indicating RFQ protocol execution within a Prime RFQ for high-fidelity execution and liquidity aggregation in institutional trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-framework-multi-leg-spreads-best-execution-capital-efficiency.jpg)

## Market Conditions

A waterfall RFQ should be deployed in illiquid markets to control information leakage and minimize the market impact of large trades. </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">
![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)

## 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">
![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)

## 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>

**Tags:** [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [Standard Market Size](https://options.greeks.live/area/standard-market-size/), [Prevailing Market Conditions](https://options.greeks.live/area/prevailing-market-conditions/), [Liquid Instruments](https://options.greeks.live/area/liquid-instruments/), [Pre-Trade Transparency](https://options.greeks.live/area/pre-trade-transparency/), [Illiquid Instruments](https://options.greeks.live/area/illiquid-instruments/)	

## Discover More

- 
### [How Has the Systematic Internaliser Regime Changed Counterparty Relationships in RFQ Trading?](https://options.greeks.live/question/how-has-the-systematic-internaliser-regime-changed-counterparty-relationships-in-rfq-trading/)
![Translucent teal panel with droplets signifies granular market microstructure and latent liquidity in digital asset derivatives. Abstract beige and grey planes symbolize diverse institutional counterparties and multi-venue RFQ protocols, enabling high-fidelity execution and price discovery for block trades via aggregated inquiry.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocols-liquidity-aggregation.jpg)

The Systematic Internaliser regime has transformed RFQ counterparty relationships from qualitative affiliations into quantitatively-managed, performance-based partnerships.

- 
### [To What Extent Can a Pre-Trade Tape Accurately Reflect Liquidity from Systematic Internalisers?](https://options.greeks.live/question/to-what-extent-can-a-pre-trade-tape-accurately-reflect-liquidity-from-systematic-internalisers/)
![A sleek, translucent fin-like structure emerges from a circular base against a dark background. This abstract form represents RFQ protocols and price discovery in digital asset derivatives. It symbolizes high-fidelity execution, liquidity pool optimization, and market microstructure of a Prime RFQ for institutional trading.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol.jpg)

The pre-trade tape is a regulated snapshot of an SI's quoted price, its accuracy being a precise function of instrument liquidity rules.

- 
### [What Are the Strategic Consequences for Firms Operating as Non-Equity Systematic Internalisers?](https://options.greeks.live/question/what-are-the-strategic-consequences-for-firms-operating-as-non-equity-systematic-internalisers/)
![A precision-engineered interface for institutional digital asset derivatives. A circular system component, perhaps an Execution Management System EMS module, connects via a multi-faceted Request for Quote RFQ protocol bridge to a distinct teal capsule, symbolizing a bespoke block trade. This depicts high-fidelity execution, optimizing market microstructure within a Principal's operational framework for atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-interface-for-institutional-digital-asset-derivatives-request-for-quote-protocol-high-fidelity-execution-within-principal-operating-system.jpg)

A non-equity SI is a firm's strategic commitment to becoming a principal liquidity provider, internalizing client flow to enhance relationships and revenue.

- 
### [How Do Systematic Internalisers Interact with the Pre-Trade Transparency Waiver Regime under MiFID II?](https://options.greeks.live/question/how-do-systematic-internalisers-interact-with-the-pre-trade-transparency-waiver-regime-under-mifid-ii/)
![Abstract geometric forms, symbolizing bilateral quotation and multi-leg spread components, precisely interact with robust institutional-grade infrastructure. This represents a Crypto Derivatives OS facilitating high-fidelity execution via an RFQ workflow, optimizing capital efficiency and price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-infrastructure.jpg)

Systematic Internalisers use MiFID II waivers to provide discreet, principal liquidity for large or illiquid trades, optimizing execution.

- 
### [What Are the Primary Regulatory Considerations under MiFID II When Designing an RFQ Platform for European Equities?](https://options.greeks.live/question/what-are-the-primary-regulatory-considerations-under-mifid-ii-when-designing-an-rfq-platform-for-european-equities/)
![An advanced digital asset derivatives system features a central liquidity pool aperture, integrated with a high-fidelity execution engine. This Prime RFQ architecture supports RFQ protocols, enabling block trade processing and price discovery. It manages multi-leg spreads and optimizes portfolio margin through quantitative analysis for alpha generation.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-execution-system-architecture.jpg)

A MiFID II-compliant RFQ platform systemically integrates transparency waivers and best execution proofs into its core trade lifecycle.

- 
### [How Do Regulatory Frameworks like MiFID II Address Information Leakage and Pre-Trade Transparency?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-address-information-leakage-and-pre-trade-transparency/)
![A precision-engineered, multi-layered system visually representing institutional digital asset derivatives trading. Its interlocking components symbolize robust market microstructure, RFQ protocol integration, and high-fidelity execution. Gears and structural elements underscore atomic settlement, liquidity aggregation, and capital efficiency within a Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-4.jpg)

MiFID II architects a tiered transparency system to control information leakage, balancing public price discovery with protected institutional execution.

- 
### [How Does MiFID II Specifically Address Information Leakage in RFQ Systems?](https://options.greeks.live/question/how-does-mifid-ii-specifically-address-information-leakage-in-rfq-systems/)
![Polished opaque and translucent spheres intersect sharp metallic structures. This abstract composition represents advanced RFQ protocols for institutional digital asset derivatives, illustrating multi-leg spread execution, latent liquidity aggregation, and high-fidelity execution within principal-driven trading environments.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-optimal-execution-orchestration.jpg)

MiFID II mandates a transparent, data-driven architecture for RFQ systems to make information leakage both auditable and economically disadvantageous.

- 
### [What Are the Primary Operational Advantages of Registering as a Systematic Internaliser?](https://options.greeks.live/question/what-are-the-primary-operational-advantages-of-registering-as-a-systematic-internaliser/)
![A chrome cross-shaped central processing unit rests on a textured surface, symbolizing a Principal's institutional grade execution engine. It integrates multi-leg options strategies and RFQ protocols, leveraging real-time order book dynamics for optimal price discovery in digital asset derivatives, minimizing slippage and maximizing capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/principals-high-fidelity-rfq-execution-digital-asset-derivatives-hub.jpg)

Registering as an SI provides architectural control over execution, transforming order flow into a proprietary liquidity and data asset.

- 
### [How Has the Role of Systematic Internalisers in the RFQ Process Evolved since the Introduction of MiFID II?](https://options.greeks.live/question/how-has-the-role-of-systematic-internalisers-in-the-rfq-process-evolved-since-the-introduction-of-mifid-ii/)
![Abstract geometric forms, including overlapping planes and central spherical nodes, visually represent a sophisticated institutional digital asset derivatives trading ecosystem. It depicts complex multi-leg spread execution, dynamic RFQ protocol liquidity aggregation, and high-fidelity algorithmic trading within a Prime RFQ framework, ensuring optimal price discovery and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-liquidity-aggregation-market-microstructure-high-fidelity-execution-alpha-generation-prime-os-capital-efficiency.jpg)

Since MiFID II, Systematic Internalisers have evolved into regulated, principal liquidity hubs for discreetly executing large trades via RFQ.

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        "caption": "This abstract composition visually interprets a Request for Quote RFQ protocol for institutional digital asset derivatives. A precise dark blue element, signifying a complex multi-leg spread or atomic settlement, is strategically positioned atop a lighter block, representing a private quotation within a Principal's operational framework. This intricate setup intersects robust teal rails, depicting established market microstructure and FIX Protocol integration, underscoring the pursuit of best execution, capital efficiency, and alpha generation through advanced algorithmic trading and smart order routing across dark pools."
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                "text": "A significant point of contention in the execution of SI quoting has been the application of the tick size regime. For trading venues, there is a harmonized tick size regime that dictates the minimum price increments for quotes. Initially, SIs were not strictly bound by this regime, needing only to ensure their quotes reflected \"prevailing market conditions.\" This created a potential advantage for SIs, as they could offer price improvement at increments smaller than one tick, a practice known as sub-tick pricing. Regulators have moved to level the playing field, increasingly requiring SI quotes to adhere to the same tick size increments as trading venues, particularly when not providing meaningful price improvement. This ensures that SIs cannot systematically undercut exchanges by infinitesimally small amounts, thereby preserving the integrity of the public price formation process on lit markets."
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---

**Original URL:** https://options.greeks.live/question/how-does-the-si-quoting-obligation-vary-between-liquid-and-illiquid-instruments/
