What Are the Key Risks Associated with Executing Large Block Trades on Public Crypto Exchanges?
The main risks are market impact and information leakage. Executing a large order on an open order book can quickly move the price against the trader, known as slippage.
Information leakage, where other traders front-run the block order, is also a major concern. Furthermore, public exchanges may have insufficient depth to absorb the trade, and regulatory uncertainty or counterparty risk on less-regulated venues adds to the complexity.
Glossar
Information Leakage
Concept ⎊ Information leakage refers to the unintentional or unauthorized disclosure of sensitive trading information that can be exploited by other market participants.
Market Impact
Influence ⎊ The concept of market impact, within cryptocurrency, options, and derivatives, fundamentally describes the price change resulting from a trade order.
Executing Large Block Trades
Execution ⎊ Executing Large Block Trades involves the strategic and systematic fulfillment of an order quantity that significantly exceeds the average daily trading volume or the depth of the prevailing order book.
Public Exchanges
FullDisclosureMandate ⎊ These platforms are typically required by regulators to broadcast all incoming and resting orders to all connected market participants simultaneously, forming the basis of transparent price discovery.
Regulatory Uncertainty
Constraint ⎊ : Ambiguous or rapidly changing rules regarding asset classification or leverage limits directly constrain the design space for crypto derivatives products.