What Mechanisms Other than a CLOB Are Used to Ensure Fair Pricing in Illiquid Markets? ▴ Learn

What Mechanisms Other than a CLOB Are Used to Ensure Fair Pricing in Illiquid Markets?

Besides a CLOB, fair pricing in illiquid markets is pursued through mechanisms like auctions and Request for Quote (RFQ) systems. Auctions, either scheduled or ad-hoc, consolidate trading interest at a specific point in time to discover a clearing price.

RFQ systems allow a buyer or seller to poll multiple market makers for competitive quotes, introducing competition to find a fair price. Additionally, independent third-party valuation services are often used to mark-to-market positions and provide pricing benchmarks where no active market exists.

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