What Role Does a ‘Principal’ versus ‘Agent’ Play in OTC Crypto Trading?

When an OTC desk acts as a 'principal,' it trades from its own inventory, taking the opposite side of the client's trade. This means the desk takes on the market risk.

When acting as an 'agent,' the desk finds a counterparty for the client's trade and charges a commission or fee. In this case, the desk does not take on the market risk.

This distinction affects pricing, execution speed, and conflict of interest.