Block trading is a specific trading form in the financial market that attracts significant attention from institutional investors and high-net-worth individuals due to its large trading volume and private negotiation characteristics. This article will explore the concept of block trading, the role of the Request for Quote (RFQ), minimum trading amounts, and the reasons for price discrepancies, helping you better understand the background and operational mechanisms of this trading method, as well as its relationship with the OKX platform.
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What is block trading?
Block trading, also known as large-scale trading, refers to transactions involving a large number of securities that are reached through private negotiations in the securities market. This trading form is commonly found among financially strong investors such as institutional investors, hedge funds, and high-net-worth individuals, as they seek to avoid the market volatility and price slippage that can arise from executing large orders in the public market. Through block trading, traders can directly contact market makers to obtain relatively stable prices without worrying about the impact of horizontal market fluctuations, providing large capital holders with flexible trading options.
Definition and role of the Request for Quote (RFQ)
A Request for Quote (RFQ) is an electronic notification sent by investors to market makers to express their intention to trade specific financial instruments or strategies. Upon receiving the RFQ, market makers are alerted and are then required to provide buy and sell prices for the requested trading strategy. Through this process, investors can ensure they receive competitive quotes and make buy or sell decisions based on this information. On the OKX trading platform, using the RFQ process can also help users efficiently obtain market information and real-time quotes, accelerating trading decisions.
Minimum amount for block trading
When understanding how block trading operates, the minimum trading amount is an important consideration. For RFQs related to pure spot trading, the minimum trading amount for block trading is $10,000 or its equivalent, while for other types of RFQs, the minimum trading amount is required to be $50,000 or its equivalent. It is worth noting that during periods of significant market volatility, exceptions may occur that exceed normal limits, meaning traders need to closely monitor market dynamics to adjust their trading strategies in response to unexpected situations.
Why the combination price on the RFQ generator differs from the market maker's quote
When engaging in block trading, investors may encounter situations where the combination price displayed by the RFQ generator differs from the quote provided by market makers. This is because the combination price shown by the RFQ generator is calculated based on the midpoint of the latest buy and sell prices in the order book. However, block trading occurs outside the order book and involves private negotiations between the matching party and market makers, so the quotes given by market makers do not have to align with the prices in the order book and may offer greater trading flexibility. Additionally, market makers' pricing will also consider factors such as liquidity, market supply and demand, and trading costs.
Conclusion
As a specific form of securities trading, block trading provides large institutional investors and traders with a method to avoid market volatility and achieve efficient trading. Understanding the role of RFQs, minimum trading amounts, and the reasons for price discrepancies can help investors better grasp knowledge in this field. On modern trading platforms like OKX, not only can trading efficiency be improved, but investors can also receive rich market data support, creating more favorable conditions for successful trading. Therefore, mastering the core elements of block trading will help drive successful investment decisions and maximize returns.