Glossary
Institutional Digital Asset Trading Glossary
All terms
40 defined
Alternative Trading System (ATS)
An alternative trading system is a non-exchange trading venue that matches buyers and sellers under SEC-registered operational rules but without the full regulatory status of a national securities exchange.
Atomic Settlement
Atomic settlement is a settlement pattern where both legs of a trade (asset delivery and payment, or two asset transfers in a swap) execute as a single indivisible transaction: either both succeed or both fail, with no intermediate state where one side has delivered and the other has not.
Atomic Swap
An atomic swap is a cryptographic protocol that enables the direct peer-to-peer exchange of two crypto-assets across different blockchains or within the same chain, without a centralized intermediary, using time-locked and hash-locked smart contracts to ensure both legs execute together or neither executes.
Basis Trade
A basis trade is a strategy that profits from the spread between a spot price and a futures price for the same underlying asset.
Best Execution
Best execution is the regulatory and contractual obligation on a firm executing orders to take sufficient steps to achieve the most favorable outcome for the client, taking into account price, costs, speed, likelihood of execution, settlement, order size, and other relevant factors.
Bilateral Settlement
Bilateral settlement is a model where two counterparties settle directly with each other without a central counterparty or clearinghouse intermediating.
Central Counterparty (CCP)
A central counterparty is the legal entity that interposes itself between the buyer and seller of a trade, guaranteeing execution and managing counterparty risk through margin, default funds, and waterfall resolution procedures.
Clearinghouse
A clearinghouse is a financial institution that stands between counterparties to a trade, guaranteeing settlement and managing counterparty credit risk.
Dark Pool
A dark pool is a trading venue where orders are not displayed publicly before execution, allowing participants to trade large blocks without signaling intent to the broader market.
Delivery versus Payment (DvP)
Delivery versus payment is a settlement model where the transfer of an asset and the transfer of payment for that asset occur simultaneously, such that neither counterparty is exposed to the risk of having delivered without receiving.
Delta
Delta is the sensitivity of an option's price to a one-unit change in the price of the underlying asset.
Execution Management System (EMS)
An execution management system is the tactical layer sitting downstream of the OMS, handling how orders are worked rather than what orders get created.
Fill or Kill (FOK)
A fill or kill order is an order type that requires the entire quantity to execute immediately, or the entire order to cancel.
Financial Information eXchange (FIX) Protocol
FIX is the electronic communications protocol that institutional financial markets use to exchange pre-trade, trade, and post-trade messages between counterparties.
Gamma
Gamma is the sensitivity of an option's delta to a one-unit change in the price of the underlying asset, or equivalently the second derivative of option price with respect to underlying.
Immediate or Cancel (IOC)
An IOC order is an order type that attempts to execute immediately at the specified price or better, filling any portion that can be executed immediately and cancelling the unfilled remainder.
Liquidity Aggregation
Liquidity aggregation is the process of combining order book and execution capacity from multiple venues into a single consolidated view that a trader or routing engine can act on.
Lit Venue
A lit venue is a trading venue that publicly displays pre-trade order book information, including bids, offers, sizes, and depth, so that all participants can see available liquidity before executing.
Maker-Taker Fee Model
Maker-taker is a venue fee structure that pays a rebate to the counterparty providing liquidity (the maker, who posts a resting limit order) and charges a fee to the counterparty removing liquidity (the taker, who executes against the resting order).
Market Making
Market making is the continuous posting of two-sided quotes (a bid and an offer) in a market, earning the bid-ask spread as profit while providing liquidity to other participants.
Markets in Crypto-Assets Regulation (MiCA)
MiCA is the European Union regulatory framework for crypto-asset issuers, service providers, and trading venues, in full effect since late 2024.
National Best Bid and Offer (NBBO)
The NBBO is the consolidated best bid and best offer across all US equity exchanges at a given moment, published by the securities information processor and used as the reference price for best-execution obligations under Regulation NMS.
Order Management System (OMS)
An order management system is the system-of-record for a firm's order flow across the full trading lifecycle.
Portfolio Management System (PMS)
A portfolio management system is the institutional software layer that tracks positions, allocations, and compliance rules across a firm's trading activity.
Pre-Funding
Pre-funding is the requirement to deposit capital at a trading venue before submitting orders, so that executed trades can settle out of the pre-positioned balance.
Prime Broker
A prime broker is a financial services firm that offers hedge funds and institutional trading firms an integrated bundle of services including execution, custody, financing, securities lending, and consolidated reporting.
Real-World Assets (RWA)
Real-world assets refers to off-chain financial and physical assets (treasuries, corporate bonds, real estate, commodities, private credit, invoices) that are represented on-chain as tokenized claims.
Regulation ATS (Reg ATS)
Regulation ATS is the SEC rule set governing alternative trading systems in the United States.
Request for Quote (RFQ)
A request for quote is a trading workflow where a client requests a firm, time-limited price from one or more counterparties for a specified instrument and size, then chooses whether to execute against one of the returned quotes.
Request for Stream (RFS)
A request for stream is an RFQ variant where a counterparty delivers a continuously updated executable price stream rather than a single firm quote, and the client can execute against any price in the stream within the session.
SEC Staff Accounting Bulletin 121 (SAB 121)
SAB 121 is an SEC Staff Accounting Bulletin issued in 2022 that required SEC-reporting entities custodying crypto-assets on behalf of others to recognize both a liability and a corresponding asset on their balance sheets equal to the fair value of the custodied assets.
Section 871(m)
Section 871(m) of the US Internal Revenue Code imposes US withholding tax on dividend-equivalent payments made to non-US persons on certain equity-linked instruments that replicate US equity economic exposure.
Smart Order Routing (SOR)
Smart order routing is an automated process that evaluates liquidity across multiple trading venues in real time and determines the optimal way to split and direct an order to achieve the best available price, taking into account fees, depth, latency, and settlement risk.
Stablecoin
A stablecoin is a crypto-asset designed to maintain a stable value relative to a reference asset, typically a fiat currency like the US dollar.
T+0 Settlement
T+0 refers to trade settlement on the same day the trade executes, or in the strictest interpretation, instantly at the time of execution.
T+1 Settlement
T+1 refers to trade settlement on the business day following the trade execution day.
Time-Weighted Average Price (TWAP)
TWAP is an execution algorithm that breaks a large parent order into equal-sized child orders executed at regular time intervals across a defined window, with the goal of achieving an average execution price close to the arithmetic average of prices observed over the window.
Tokenized Security
A tokenized security is a financial security (equity, debt, or hybrid instrument) represented on a blockchain as a token that carries the rights and obligations of the underlying security.
Transaction Cost Analysis (TCA)
Transaction cost analysis is the discipline of measuring execution quality against benchmarks, decomposing total execution cost into its components (spread cost, market impact, timing cost, venue fees, slippage versus arrival price), and using the resulting analytics to improve future execution decisions.
Volume-Weighted Average Price (VWAP)
VWAP is both a benchmark and an execution algorithm.
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