Does the Market Maker’s Capital Base Influence the Required Minimum RFQ Size?
Yes, a market maker's capital base significantly influences the minimum RFQ size. A larger capital base allows the market maker to absorb greater potential losses from adverse price movements and to fund larger inventory positions.
This ability to absorb risk allows them to quote tighter spreads and accept smaller minimum RFQ sizes.
Glossar
Required Capital
Minimum ⎊ The smallest amount of liquid assets an institution or trader must hold to cover potential losses defines their required capital.
Adverse Price Movements
Volatility ⎊ Adverse price movements, particularly within cryptocurrency derivatives and options markets, represent deviations from anticipated price trajectories, often characterized by heightened instability and accelerated rate of change.
Capital Base Influence
Foundation ⎊ Capital Base Influence, within cryptocurrency derivatives and options trading, represents the proportional relationship between an entity’s available capital and its trading activity, directly impacting market participation and systemic risk.