What Is the Role of a “Pricer” in Minimizing Slippage for RFQ Responses?

The "pricer" is the core algorithmic component used by the market maker to generate the RFQ quote. Its role in minimizing slippage is to incorporate all known costs and risks, including a calculated market impact cost, into the quote before execution.

A sophisticated pricer uses real-time data, implied volatility, inventory levels, and hedging costs to ensure the quote is competitive yet adequately compensates for the execution risk, thereby reducing the likelihood of unexpected negative slippage.