RFQ Meaning

An RFQ (Request for Quote) is a formal business process where a buyer asks a liquidity provider or market maker to provide a specific price for a large transaction. This is a quote-driven mechanism, contrasting with the order-driven mechanism of a public limit order book.

It is the standard operating procedure for institutional Over-the-Counter (OTC) trading where privacy and price certainty are paramount.The process flow begins when a client sends a request for a specific volume, triggering a short-lived "firm price" offer from one or more market makers. In the digital asset space, these systems often use cryptographic signatures to lock in the price for a brief window (typically 10-30 seconds).

If the client accepts, the trade is programmatically guaranteed to settle at that exact price, regardless of how the broader market moves during the execution phase.The strategic value of RFQ is the total elimination of "slippage" and "price impact" for large orders. On a public exchange, a multi-million dollar buy order would "eat through" the order book, significantly raising the price for the buyer as they buy up available supply.

Through an RFQ, the liquidity provider assumes the risk of sourcing the assets behind the scenes, offering the buyer a single, transparent cost of execution.