How Does the Lack of a Standardized Delivery Protocol Affect Liquidity? ⎊ Path

How Does the Lack of a Standardized Delivery Protocol Affect Liquidity?

The lack of a standardized delivery protocol increases uncertainty, complexity, and cost for market participants. If every exchange or contract has different rules for the quality, location, or timing of delivery, it creates friction for market makers and arbitrageurs.

This fragmentation deters participation, which ultimately reduces the overall liquidity of the physically settled market.

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Glossar

Standardized Delivery

Procedure ⎊ This refers to the pre-agreed, non-negotiable process for the physical exchange of the underlying asset upon option exercise or futures expiration.

Standardized Delivery Protocol

Settlement ⎊ A Standardized Delivery Protocol within cryptocurrency options and financial derivatives defines the precise procedures for the final transfer of the underlying asset or cash equivalent upon exercise or expiration.