# What Are the Key Differences in Audit Requirements between a Lit Market and an RFQ Protocol? ▴ Question

**Published:** 2025-08-10
**Categories:** Question

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![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)

![Abstract spheres depict segmented liquidity pools within a unified Prime RFQ for digital asset derivatives. Intersecting blades symbolize precise RFQ protocol negotiation, price discovery, and high-fidelity execution of multi-leg spread strategies, reflecting market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-1.jpg)

## Concept

![A complex core mechanism with two structured arms illustrates a Principal Crypto Derivatives OS executing RFQ protocols. This system enables price discovery and high-fidelity execution for institutional digital asset derivatives block trades, optimizing market microstructure and capital efficiency via private quotations](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-protocol-system.jpg)

## The Divergence of Data Trails

The core distinction in audit requirements between a lit market and a Request for Quote (RFQ) protocol is rooted in their fundamental structural opposition. A lit market, operating on 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) (CLOB), is a system of continuous, multilateral, and anonymous competition. Its defining characteristic is the public dissemination of order and trade data, creating a comprehensive, time-stamped record of market activity accessible to all participants and regulators simultaneously. The [audit trail](https://prime.greeks.live/question/how-does-an-rfq-audit-trail-differ-from-an-exchange-order-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is, in essence, a public utility.

Conversely, an [RFQ protocol](https://prime.greeks.live/area/rfq-protocol/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a bilateral or quasi-bilateral negotiation. It is inherently discreet, with communication confined to the requester and a select group of liquidity providers. This creates a fragmented, private data landscape where the primary audit challenge is not the surveillance of public activity, but the reconstruction of a private one.

In a [lit market](https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the audit function is one of monitoring a torrential data stream for patterns of prohibited behavior. The system’s transparency is its primary control. Every order, modification, cancellation, and execution is a public record, timestamped and sequenced. Regulators and [compliance](https://prime.greeks.live/area/compliance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) teams focus on analyzing this universal dataset to detect manipulative strategies like spoofing, layering, or wash trading.

The integrity of the market is policed by observing the visible interactions of all participants within the central book. The audit process is akin to monitoring a public square; the actions are visible, and the challenge lies in interpreting intent from a vast quantity of observable data.

> The fundamental difference lies in auditing a public, continuous stream of data versus reconstructing a series of private, discrete negotiations.

The RFQ protocol presents a starkly different challenge. Here, the audit trail is not a public broadcast but a collection of private conversations that must be meticulously logged and aggregated. The primary regulatory concern shifts from market manipulation to ensuring best execution and preventing [information leakage](https://prime.greeks.live/area/information-leakage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Since the [price discovery](https://prime.greeks.live/area/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) process is not public, the onus is on the investment firm to prove it achieved the best possible result for its client under the prevailing market conditions.

The audit trail must capture the entire lifecycle of the request ▴ who was asked to quote, the prices they returned, the time each response was received, and a justification for the final execution decision. It is a forensic reconstruction of a specific, isolated trading event rather than the surveillance of a continuous market.

![Two sharp, teal, blade-like forms crossed, featuring circular inserts, resting on stacked, darker, elongated elements. This represents intersecting RFQ protocols for institutional digital asset derivatives, illustrating multi-leg spread construction and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-best-execution.jpg)

![A spherical, eye-like structure, an Institutional Prime RFQ, projects a sharp, focused beam. This visualizes high-fidelity execution via RFQ protocols for digital asset derivatives, enabling block trades and multi-leg spreads with capital efficiency and best execution across market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-prime-os-rfq-protocol-digital-asset-derivatives-block-trade-execution.jpg)

## Strategy

![A translucent sphere with intricate metallic rings, an 'intelligence layer' core, is bisected by a sleek, reflective blade. This visual embodies an 'institutional grade' 'Prime RFQ' enabling 'high-fidelity execution' of 'digital asset derivatives' via 'private quotation' and 'RFQ protocols', optimizing 'capital efficiency' and 'market microstructure' for 'block trade' operations](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-engine-for-digital-asset-derivatives-best-execution.jpg)

## Surveillance versus Reconstruction

The strategic approach to auditing these two environments diverges accordingly. For [lit markets](https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the strategy is one of large-scale data analysis and pattern recognition. For RFQ protocols, it is one of evidence collection and process verification. Regulatory frameworks like MiFID II in Europe and the [Consolidated Audit Trail](https://prime.greeks.live/question/how-does-an-rfq-audit-trail-differ-from-an-exchange-order-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CAT) in the United States mandate the capture of granular data for both, but the nature of that data and its application in an audit are fundamentally different.

In the context of a lit exchange, compliance strategy revolves around the ingestion and analysis of the complete market data feed. The goal is to recreate the [order book](https://prime.greeks.live/area/order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) at any given millisecond to understand the context of a specific trade. This allows auditors to assess whether an order was manipulative or contributed to a distorted market picture. The focus is systemic.

For instance, an audit might scrutinize a series of rapid order submissions and cancellations that occur away from the touch to determine if they were intended to deceive other market participants. The strategy is to find the proverbial needle of misconduct in a haystack of legitimate trading activity.

![A sleek Execution Management System diagonally spans segmented Market Microstructure, representing Prime RFQ for Institutional Grade Digital Asset Derivatives. It rests on two distinct Liquidity Pools, one facilitating RFQ Block Trade Price Discovery, the other a Dark Pool for Private Quotation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-execution-optimizing-rfq-protocols-across-segmented-liquidity-pools.jpg)

## Data Points in Focus

The strategic importance of different data points varies significantly between the two protocols. While both require timestamps and instrument identifiers, the contextual data surrounding them is unique.

- **Lit Market Audit** ▴ The critical data includes the full order book depth, time-stamped order events (new, cancel, amend), execution reports, and flags indicating order attributes like “Immediate or Cancel” (IOC). The relationship between individual orders and the broader state of the public order book is the central point of analysis.

- **RFQ Protocol Audit** ▴ Here, the crucial data includes the list of dealers solicited, the full set of quotes received (including price, quantity, and response time), the identity of the winning dealer, and any communication related to the negotiation. The audit focuses on the internal decision-making process of the requester.

![An abstract composition depicts a glowing green vector slicing through a segmented liquidity pool and principal's block. This visualizes high-fidelity execution and price discovery across market microstructure, optimizing RFQ protocols for institutional digital asset derivatives, minimizing slippage and latency](https://options.greeks.live/wp-content/uploads/2025/07/optimal-precise-digital-asset-derivative-rfq-execution-via-smart-protocols-for-institutional-trading.jpg)

## The Best Execution Mandate

The concept of “[best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” provides the clearest strategic differentiator. In a lit market, demonstrating best execution often involves comparing a trade’s execution price to the publicly available National Best Bid and Offer (NBBO) at the time of the trade. The public data provides a clear, objective benchmark.

For an RFQ transaction, this benchmark is absent. The firm must create its own audit trail to prove it met its best execution obligations. This involves documenting that a sufficient number of competitive dealers were solicited to ensure a fair price, and that the final execution was justified based on the quotes received.

The audit strategy is to build a defensible case for each trade, demonstrating a rigorous and fair process in the absence of a continuous public price. This is why regulations like [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) place such a strong emphasis on the record-keeping and reporting of the entire RFQ lifecycle.

> Lit market audits test against a public benchmark, while RFQ audits require the firm to construct its own evidence of a fair process.

The table below outlines the strategic differences in the audit approach for each protocol.

| Audit Dimension | Lit Market (CLOB) | RFQ Protocol |
| --- | --- | --- |
| Primary Goal | Detecting market manipulation (e.g. spoofing, layering). | Verifying best execution and fair pricing. |
| Core Methodology | Systemic surveillance of public data feeds. | Forensic reconstruction of private negotiations. |
| Key Evidence | Complete, time-stamped order book data (e.g. CAT, OATS). | Logs of RFQ requests, all dealer quotes, and execution records. |
| Benchmark for “Good” | Execution price relative to public NBBO. | Competitiveness of quotes received from multiple dealers. |
| Regulatory Focus | Market integrity and fairness to all participants. | Fiduciary duty to the specific client initiating the trade. |

![An abstract composition of interlocking, precisely engineered metallic plates represents a sophisticated institutional trading infrastructure. Visible perforations within a central block symbolize optimized data conduits for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-multi-leg-execution-layer.jpg)

![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](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution-architecture.jpg)

## Execution

![Two reflective, disc-like structures, one tilted, one flat, symbolize the Market Microstructure of Digital Asset Derivatives. This metaphor encapsulates RFQ Protocols and High-Fidelity Execution within a Liquidity Pool for Price Discovery, vital for a Principal's Operational Framework ensuring Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-liquidity-aggregation-optimizing-market-microstructure-principal-trading-best-execution-atomic-settlement.jpg)

## The Mechanics of Data Capture and Analysis

Executing a compliant audit requires distinct operational workflows and technological capabilities for lit and RFQ environments. The systems and processes are tailored to the unique data structures each protocol generates. For lit markets, the execution of an audit is a post-trade analytics function performed on a massive, standardized dataset. For RFQ, it is an ongoing, real-time logging process that is integral to the act of trading itself.

![A sleek Principal's Operational Framework connects to a glowing, intricate teal ring structure. This depicts an institutional-grade RFQ protocol engine, facilitating high-fidelity execution for digital asset derivatives, enabling private quotation and optimal price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-execution-engine-for-digital-asset-derivatives-rfq.jpg)

## Executing a Lit Market Audit

The operational reality of a lit market audit hinges on the firm’s ability to process and analyze data from a [consolidated audit](https://prime.greeks.live/question/how-does-the-consolidated-audit-trail-differentiate-between-an-ioi-message-and-an-actionable-rfq-response/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) trail system, such as the CAT in the U.S. which succeeded the OATS system. The process typically involves these steps:

- **Data Ingestion** ▴ The firm’s surveillance system ingests daily data files from the consolidated audit trail, which contain a full record of every order event from all market participants.

- **Order Linkage** ▴ The system links related order events for each unique order identifier, creating a complete lifecycle from origination to final execution or cancellation.

- **Market Reconstruction** ▴ Sophisticated software reconstructs the state of the CLOB at any point in time, allowing auditors to see the market conditions that existed when a specific order was entered or executed.

- **Alert Generation** ▴ The system runs pre-defined algorithms to detect suspicious patterns, such as orders that are placed and cancelled with high frequency without leading to execution, or trades that appear to have no economic purpose.

- **Investigation** ▴ Compliance officers investigate the generated alerts, reviewing the reconstructed market data to determine if a rule violation occurred.

![A sleek green probe, symbolizing a precise RFQ protocol, engages a dark, textured execution venue, representing a digital asset derivatives liquidity pool. This signifies institutional-grade price discovery and high-fidelity execution through an advanced Prime RFQ, minimizing slippage and optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-integration-for-high-fidelity-execution-and-institutional-liquidity-aggregation-on-prime-os.jpg)

## The RFQ Audit Execution Workflow

Executing an audit for an RFQ protocol is a fundamentally different exercise. The process is less about post-trade analysis of a public dataset and more about ensuring the integrity of the data captured during the private negotiation.

The core of the RFQ audit is the preservation of the “quote book.” While a lit market has a public order book, a firm using an RFQ protocol must maintain its own private quote book for every transaction. This record is the primary evidence for a best execution audit. The following table details the essential data fields that must be captured for a compliant RFQ audit trail, as mandated by regulations like MiFID II.

| Data Element | Description | Audit Purpose |
| --- | --- | --- |
| Client Identifier | Unique code for the client initiating the RFQ. | Links the trade to a specific client obligation. |
| Instrument Identifier | ISIN or other standard code for the security. | Defines the specific instrument being traded. |
| RFQ Timestamp | The precise time the request was sent to dealers. | Establishes the start of the best execution window. |
| Solicited Dealer IDs | A list of all liquidity providers asked to quote. | Demonstrates that a competitive field was sought. |
| Quote Timestamps | The time each dealer’s quote was received. | Records the timeliness of responses. |
| Quote Prices & Sizes | The full set of bids and offers from all solicited dealers. | Provides the core evidence for price comparison. |
| Winning Quote | The quote that was ultimately accepted by the requester. | Identifies the executed price and counterparty. |
| Execution Timestamp | The precise time the trade was executed. | Concludes the transaction lifecycle for reporting. |

> A compliant RFQ system functions as its own audit trail, capturing the necessary evidence of best execution as the trade happens.

The execution of the audit then becomes a review of this captured data. Auditors will verify that the process was fair by asking key questions ▴ Was a sufficient number of dealers queried? Was the winning quote genuinely the best price available at that moment, considering all factors?

Are there patterns of favoring certain dealers over others without justification? In the RFQ world, the trading platform and the audit system are one and the same.

![Polished metallic pipes intersect via robust fasteners, set against a dark background. This symbolizes intricate Market Microstructure, RFQ Protocols, and Multi-Leg Spread execution](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-metallic-nodes-illustrating-rfq-protocols-for-multi-leg-digital-asset-derivatives-institutional-execution.jpg)

## References

- European Securities and Markets Authority. (2018). MiFID II and MiFIR. ESMA.

- FINRA. (2021). Regulatory Notice 21-21 ▴ FINRA Eliminates the Order Audit Trail System (OATS) Rules. Financial Industry Regulatory Authority.

- International Capital Market Association. (2016). Evolutionary Change ▴ The future of electronic trading of cash bonds in Europe. ICMA.

- Bank for International Settlements. (2016). Electronic trading in fixed income markets. BIS Committee on the Global Financial System.

- Tradeweb. (2019). RFQ for Equities ▴ Arming the buy-side with choice and ease of execution. Tradeweb.

- Eurex. (2025). Reporting handbook for audit trail and other regulatory reporting under the MiFID II / MiFIR regime. Eurex.

- Securities and Exchange Commission. (2016). Rule 613 (Consolidated Audit Trail). U.S. Securities and Exchange Commission.

- Novatus Global. (2020). Best Execution ▴ MiFID II & SEC Compliance Essentials Explained.

![A precise mechanical instrument with intersecting transparent and opaque hands, representing the intricate market microstructure of institutional digital asset derivatives. This visual metaphor highlights dynamic price discovery and bid-ask spread dynamics within RFQ protocols, emphasizing high-fidelity execution and latent liquidity through a robust Prime RFQ for atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineering-driving-institutional-digital-asset-derivatives-execution-across-advanced-rfq-protocols-and-prime-brokerage-frameworks.jpg)

## Reflection

![Abstract depiction of an advanced institutional trading system, featuring a prominent sensor for real-time price discovery and an intelligence layer. Visible circuitry signifies algorithmic trading capabilities, low-latency execution, and robust FIX protocol integration for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-high-fidelity-rfq-protocols.jpg)

## From Data Compliance to Systemic Intelligence

Understanding the distinctions in audit requirements between lit and RFQ markets moves beyond a simple compliance checklist. It prompts a deeper evaluation of a firm’s entire operational framework. The two protocols represent opposing philosophies of data generation ▴ one public and continuous, the other private and discrete. A truly robust compliance system is one that is architected to handle this duality with equal precision.

The data captured for these audits should not be viewed merely as a regulatory burden. It is a rich source of strategic intelligence. The logs of an RFQ process can inform future dealer selection and negotiation strategy. The analysis of lit market data can refine algorithmic execution and reduce market impact.

The ultimate goal is to build a system where the act of ensuring compliance simultaneously generates the intelligence needed to achieve a superior operational edge. The question then becomes ▴ is your firm’s architecture simply recording the past, or is it actively learning from it to inform the future?

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

## 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">
![Two high-gloss, white cylindrical execution channels with dark, circular apertures and secure bolted flanges, representing robust institutional-grade infrastructure for digital asset derivatives. These conduits facilitate precise RFQ protocols, ensuring optimal liquidity aggregation and high-fidelity execution within a proprietary Prime RFQ environment](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-execution-channels-enabling-private-quotation-and-optimal-liquidity-aggregation-for-high-fidelity-digital-asset-derivatives-rfq-protocols-on-prime-os.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/question/how-does-an-rfq-audit-trail-differ-from-an-exchange-order-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A teal-blue disk, symbolizing a liquidity pool for digital asset derivatives, is intersected by a bar. This represents an RFQ protocol or block trade, detailing high-fidelity execution pathways](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocols-high-fidelity-digital-asset-execution.jpg)

## Audit Trail

An RFQ audit trail records a private negotiation's lifecycle; an exchange trail logs an order's public, anonymous journey. </a><a href="https://prime.greeks.live/area/rfq-protocol/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Smooth, layered surfaces represent a Prime RFQ Protocol architecture for Institutional Digital Asset Derivatives. They symbolize integrated Liquidity Pool aggregation and optimized Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/market-microstructure-rfq-protocols-for-digital-asset-derivatives.jpg)

## Rfq Protocol

Meaning ▴ The Request for Quote (RFQ) Protocol defines a structured electronic communication method enabling a market participant to solicit firm, executable prices from multiple liquidity providers for a specified financial instrument and quantity. </a><a href="https://prime.greeks.live/area/compliance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A multifaceted, luminous abstract structure against a dark void, symbolizing institutional digital asset derivatives market microstructure. Its sharp, reflective surfaces embody high-fidelity execution, RFQ protocol efficiency, and precise price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-protocol-architecture-optimizing-high-fidelity-rfq-execution-and-latent-liquidity-discovery.jpg)

## Compliance

Meaning ▴ Compliance, within the context of institutional digital asset derivatives, signifies the rigorous adherence to established regulatory mandates, internal corporate policies, and industry best practices governing financial operations. </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">
![Three metallic, circular mechanisms represent a calibrated system for institutional-grade digital asset derivatives trading. The central dial signifies price discovery and algorithmic precision within RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-and-execution-precision.jpg)

## Lit Market

Meaning ▴ A lit market is a trading venue providing mandatory pre-trade transparency. </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 sophisticated apparatus, potentially a price discovery or volatility surface calibration tool. A blue needle with sphere and clamp symbolizes high-fidelity execution pathways and RFQ protocol integration within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-institutional-digital-asset-derivatives-execution.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/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract visualization of institutional RFQ protocol for digital asset derivatives. Translucent layers symbolize dark liquidity pools within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-6.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/how-does-an-rfq-audit-trail-differ-from-an-exchange-order-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting abstract geometric planes depict institutional grade RFQ protocols and market microstructure. Speckled surfaces reflect complex order book dynamics and implied volatility, while smooth planes represent high-fidelity execution channels and private quotation systems for digital asset derivatives within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocols-digital-asset-microstructure-execution.jpg)

## Consolidated Audit Trail

An RFQ audit trail records a private negotiation's lifecycle; an exchange trail logs an order's public, anonymous journey. </a><a href="https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition featuring two overlapping digital asset liquidity pools, intersected by angular structures representing multi-leg RFQ protocols. This visualizes dynamic price discovery, high-fidelity execution, and aggregated liquidity within institutional-grade crypto derivatives OS, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimizing-aggregated-liquidity-and-multi-leg-execution-via-advanced-market-microstructure.jpg)

## Lit Markets

Meaning ▴ Lit Markets are centralized exchanges or trading venues characterized by pre-trade transparency, where bids and offers are publicly displayed in an order book prior to execution. </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">
![A sleek, bimodal digital asset derivatives execution interface, partially open, revealing a dark, secure internal structure. This symbolizes high-fidelity execution and strategic price discovery via institutional RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocols-price-discovery.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/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sharp, transparent, teal structures and a golden line intersect a dark void. This symbolizes market microstructure for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-execution-leveraging-granular-market-microstructure-intelligence.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/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, metallic, modular hardware with visible circuit elements, symbolizing the market microstructure for institutional digital asset derivatives. This low-latency infrastructure supports RFQ protocols, enabling high-fidelity execution for private quotation and block trade settlement, ensuring capital efficiency within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/08/market-microstructure-engine-for-crypto-derivatives-rfq-protocol.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/question/how-does-the-consolidated-audit-trail-differentiate-between-an-ioi-message-and-an-actionable-rfq-response/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The abstract image features angular, parallel metallic and colored planes, suggesting structured market microstructure for digital asset derivatives. A spherical element represents a block trade or RFQ protocol inquiry, reflecting dynamic implied volatility and price discovery within a dark pool](https://options.greeks.live/wp-content/uploads/2025/07/optimized-institutional-digital-asset-derivatives-rfq-protocol-framework-ensuring-principal-best-execution-and-latent-liquidity-capture.jpg)

## Consolidated Audit

CAT distinguishes IOIs as non-firm inquiries from actionable RFQ responses, which are firm orders triggering reporting. </a>

**Tags:** [MiFID II](https://options.greeks.live/area/mifid-ii/), [Market Surveillance](https://options.greeks.live/area/market-surveillance/), [RFQ Protocol](https://options.greeks.live/area/rfq-protocol/), [Order Book](https://options.greeks.live/area/order-book/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [Compliance](https://options.greeks.live/area/compliance/)	

## Discover More

- 
### [What Are the Key Differences in Applying Best Execution to RFQs versus Lit Markets?](https://options.greeks.live/question/what-are-the-key-differences-in-applying-best-execution-to-rfqs-versus-lit-markets/)
![A central toroidal structure and intricate core are bisected by two blades: one algorithmic with circuits, the other solid. This symbolizes an institutional digital asset derivatives platform, leveraging RFQ protocols for high-fidelity execution and price discovery. It optimizes market microstructure for capital efficiency, managing multi-leg spreads and latent liquidity within a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-hub-integrating-algorithmic-intelligence-for-high-fidelity-price-discovery-and-liquidity-aggregation.jpg)

Best execution requires managing algorithmic impact in lit markets and curating competitive, discrete auctions in RFQ systems.

- 
### [How Do Smart Order Routers Decide between Using RFQ and Lit Market Protocols for a Single Order?](https://options.greeks.live/question/how-do-smart-order-routers-decide-between-using-rfq-and-lit-market-protocols-for-a-single-order/)
![Two sleek, pointed objects intersect centrally, forming an 'X' against a dual-tone black and teal background. This embodies the high-fidelity execution of institutional digital asset derivatives via RFQ protocols, facilitating optimal price discovery and efficient cross-asset trading within a robust Prime RFQ, minimizing slippage and adverse selection.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-microstructure.jpg)

An SOR's logic routes orders by calculating the optimal path that minimizes total execution cost, weighing RFQ discretion against lit market immediacy.

- 
### [When Should Institutional Traders Employ Request for Quote Protocols over Lit Market Interaction?](https://options.greeks.live/question/when-should-institutional-traders-employ-request-for-quote-protocols-over-lit-market-interaction/)
![A refined object featuring a translucent teal element, symbolizing a dynamic RFQ for Institutional Grade Digital Asset Derivatives. Its precision embodies High-Fidelity Execution and seamless Price Discovery within complex Market Microstructure. The reflective surface suggests deep Liquidity Pool access for Block Trade and Private Quotation protocols.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-for-optimal-execution-and-deep-liquidity-aggregation.jpg)

Institutional traders use RFQ protocols over lit markets for large, complex, or illiquid trades to minimize market impact and source deep liquidity.

- 
### [The Institutional Guide to Executing Block Trades with RFQ](https://options.greeks.live/guide/the-institutional-guide-to-executing-block-trades-with-rfq/)
![A macro view of a precision-engineered metallic component, representing the robust core of an Institutional Grade Prime RFQ. Its intricate Market Microstructure design facilitates Digital Asset Derivatives RFQ Protocols, enabling High-Fidelity Execution and Algorithmic Trading for Block Trades, ensuring Capital Efficiency and Best Execution.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-core-system-for-institutional-digital-asset-derivatives-rfq-protocol-execution-and-advanced-market-microstructure-optimization.jpg)

Command institutional liquidity and execute block trades with surgical price precision.

- 
### [From a Regulatory Perspective Is the Growth of RFQ Trading a Concern for Market Fairness?](https://options.greeks.live/question/from-a-regulatory-perspective-is-the-growth-of-rfq-trading-a-concern-for-market-fairness/)
![A luminous teal bar traverses a dark, textured metallic surface with scattered water droplets. This represents the precise, high-fidelity execution of an institutional block trade via a Prime RFQ, illustrating real-time price discovery. The droplets symbolize dynamic market microstructure and managed latent liquidity, crucial for optimal capital efficiency in digital asset derivatives RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-real-time-institutional-digital-asset-rfq-execution-stream-visualizing-prime-os-liquidity-flow.jpg)

The growth of RFQ trading is a managed concern, addressed by regulations that trade pre-trade opacity for rigorous post-trade transparency and best execution mandates.

- 
### [How Does an RFQ System Mitigate the Risk of Information Leakage during a Large Trade?](https://options.greeks.live/question/how-does-an-rfq-system-mitigate-the-risk-of-information-leakage-during-a-large-trade/)
![A proprietary Prime RFQ platform featuring extending blue/teal components, representing a multi-leg options strategy or complex RFQ spread. The labeled band 'F331 46 1' denotes a specific strike price or option series within an aggregated inquiry for high-fidelity execution, showcasing granular market microstructure data points.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-1.jpg)

An RFQ system mitigates leakage by converting a public broadcast of intent into a series of discrete, private negotiations with select liquidity providers.

- 
### [How Does the Best Execution Reporting for a Request for Quote System Differ from a Lit Order Book?](https://options.greeks.live/question/how-does-the-best-execution-reporting-for-a-request-for-quote-system-differ-from-a-lit-order-book/)
![A teal-blue disk, symbolizing a liquidity pool for digital asset derivatives, is intersected by a bar. This represents an RFQ protocol or block trade, detailing high-fidelity execution pathways. The interaction illustrates price discovery and market microstructure dynamics, central to a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocols-high-fidelity-digital-asset-execution.jpg)

Best execution reporting for a lit book verifies interaction with public data, while for an RFQ, it justifies a negotiated outcome to minimize impact.

- 
### [What Are the Primary Trade-Offs between Using a Dark Pool and a Lit Market for Execution?](https://options.greeks.live/question/what-are-the-primary-trade-offs-between-using-a-dark-pool-and-a-lit-market-for-execution/)
![Central nexus with radiating arms symbolizes a Principal's sophisticated Execution Management System EMS. Segmented areas depict diverse liquidity pools and dark pools, enabling precise price discovery for digital asset derivatives. Circular markers denote RFQ participants, ensuring high-fidelity execution of institutional block trades within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-liquidity-orchestration.jpg)

The primary trade-off is between the price discovery of lit markets and the reduced market impact of dark pools.

- 
### [What Are the Key Differences in Record-Keeping for RFQ versus Lit Order Books?](https://options.greeks.live/question/what-are-the-key-differences-in-record-keeping-for-rfq-versus-lit-order-books/)
![A sharp, metallic blue instrument with a precise tip rests on a light surface, suggesting pinpoint price discovery within market microstructure. This visualizes high-fidelity execution of digital asset derivatives, highlighting RFQ protocol efficiency. It represents the intelligence layer of a Prime RFQ for atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivative-rfq-execution-market-microstructure-high-fidelity-alpha-generation-prime-os-system.jpg)

The key difference in record-keeping is documenting a public, sequential auction (Lit Book) versus a private, parallel negotiation (RFQ).

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---

**Original URL:** https://options.greeks.live/question/what-are-the-key-differences-in-audit-requirements-between-a-lit-market-and-an-rfq-protocol/
