Market makers are increasingly utilizing the Request for Quote (RFQ) mechanism in options trading to manage risk and ensure fair pricing. Unlike direct order book placements, which can lead to unhedged exposures if orders are filled rapidly, RFQs allow market makers to assess the pricing and execution of large orders more effectively. This approach is particularly beneficial in options markets, where trading complexity and lower liquidity compared to futures markets make RFQs a preferred method for executing large trades. While futures markets also offer RFQ to minimize slippage, its usage is less common due to higher liquidity levels.
RFQ Mechanism Gains Traction in Options Trading for Market Makers
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