How Does a Request for Quote (RFQ) System Differ from an Order Book Exchange in Derivatives?
An RFQ system is a bilateral negotiation model where a buyer requests a price from specific liquidity providers. It is typically used for large, illiquid, or complex trades like bespoke options.
An order book exchange is a multilateral, centralized model where buyers and sellers post limit orders. Order books offer transparency and immediate execution for standardized products, while RFQ provides better price control for large orders without market impact.
Glossar
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.
Order Book Exchange
Mechanism ⎊ Order book exchanges, within cryptocurrency, options, and derivatives markets, function as centralized systems facilitating price discovery and trade execution through displayed buy and sell orders.
Bilateral Negotiation Model
Negotiation ⎊ The bilateral negotiation model describes a principal-to-principal trading arrangement where two parties directly agree upon the terms, price, and size of a financial derivative transaction.
Order Book
Depth ⎊ An order book represents a listing of buy and sell orders for a specific cryptocurrency, option contract, or derivative, displaying price and quantity at various levels.