How Does Non-Custodial Settlement Reduce Counterparty Risk in an RFQ Environment?
Non-custodial settlement means the RFQ platform never holds the client's assets, removing the platform itself as a single point of failure or potential target for hacking. The assets remain with a regulated, qualified custodian or the client's own wallet until the trade is confirmed.
This separation of trading and custody significantly mitigates platform-level counterparty risk. It ensures assets are only moved upon successful trade completion.
Glossar
Qualified Custodians
Safekeeping ⎊ Qualified custodians, within cryptocurrency, options, and derivatives, represent entities legally responsible for asset protection, distinct from brokers who facilitate trading.
Atomic Swaps
Exchange ⎊ A protocol allowing for the direct, peer-to-peer exchange of one cryptocurrency for another across disparate blockchain networks without the need for a centralized intermediary or custodian.
Counterparty Risk
Exposure ⎊ Counterparty risk represents the potential loss incurred when a trading partner defaults on their contractual obligations.
Single Point of Failure
Concentration ⎊ In crypto derivatives, this risk materializes when excessive collateral or governance control resides with a small number of entities, such as a few large liquidity providers or key developers.
Trade Anonymity
Concealment ⎊ Trade anonymity, within cryptocurrency, options, and derivatives, represents a deliberate obscuring of the ultimate beneficial owner of a transaction, achieved through layered structures or privacy-enhancing technologies.
Rfq Platform
Definition ⎊ Rfq Platform is the dedicated trading technology used by institutional participants to solicit firm, private pricing quotes from multiple liquidity providers simultaneously for large or complex derivative trades.