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.