Can Front-Running Occur on a Request for Quote (RFQ) Options Platform?
Yes, front-running can occur on an RFQ platform, though the mechanism differs from an order book. A market maker who receives a client's RFQ (which is non-public information) could potentially use that knowledge to trade the underlying asset or other options before quoting the client, anticipating the market impact of the client's eventual trade.
However, reputable RFQ platforms have strict rules and surveillance to prevent this informational abuse by market makers.
Glossar
Underlying Asset
Futures Pricing incorporates the cost of carry, which in crypto markets includes funding rates derived from perpetual swap markets and the time value associated with holding the spot asset.
Request for Quote
Inquiry ⎊ A Request for Quote (RFQ) within cryptocurrency derivatives represents a formalized solicitation from a potential client to multiple counterparties for pricing and terms related to a specific transaction.
Decentralized Options Platform
Architecture ⎊ A Decentralized Options Platform (DOP) leverages blockchain technology, typically employing smart contracts on networks like Ethereum or Solana, to facilitate options trading without intermediaries.