Crypto Options RFQ and Block Trading: How It Works

RFQ and block trading in brief

Liquid Mercury, the Chicago-based institutional digital asset infrastructure provider, builds the software that desks and brokers use to quote, execute and settle these trades. This page explains the mechanics and the options workflow in neutral terms, then shows where an RFQ network and Mercury OTC fit. For the one-line definition, see the RFQ glossary entry.

A note on terms. "Block trading" has two meanings online. In institutional markets it means a large trade negotiated and executed as one piece. In chart-trading slang, "order blocks" are price zones that technical traders mark on a chart. This page covers the first meaning only.

RFQ vs CLOB

A CLOB shows resting bids and offers from all participants. Your order matches against whatever is displayed, level by level. An RFQ works the other way round: you state the instrument, side and size, and dealers respond with firm prices for that exact size.

Neither is better in general. A liquid pair at a modest size is usually cheapest on a book, and a size the book cannot absorb is usually better priced by request. Many desks use both and compare the all-in cost. RFS (request for stream) sits between the two: the dealer streams updating prices and you act on one.

How block trades work

A block trade is a trade large enough that executing it on the order book would visibly move the price. There is no universal size threshold, because the answer depends on the asset and on how deep the market is at the time.

A typical electronic block trade runs like this.

1. Request. The client states the asset, side, size and any settlement constraints.
2. Quotes. One or more liquidity providers return firm prices, each valid for a stated window.
3. Decision. The client accepts a quote or lets the window lapse.
4. Execution and checks. The platform checks the trade against the client's limits and records the execution.
5. Settlement and records. The asset and payment settle, and the full quote trail is stored for review.

The dealer takes the risk of holding or hedging the position, and that cost is inside the quote. Judge a block quote by its all-in price against what the same order would have cost on an exchange, including slippage. The wider treatment is in crypto block trading and the OTC trading guide.

Regulators treat large and negotiated trades with specific rules in traditional markets. The EU's MiFID II and MiFIR framework sets out transparency requirements for trading venues and investment firms. Crypto is moving toward comparable rulebooks, and the Financial Stability Board's framework for crypto-asset activities describes the direction of travel. Check which rules apply to your entity and venue.

Corporate treasuries face the same size problem when they buy or sell bitcoin. See corporate bitcoin treasury liquidity.

The options RFQ workflow

Options are a natural fit for RFQ. A listed book may show tight quotes for a few popular strikes and expiries, and little or nothing for the strike, expiry or size you want. Multi-leg structures such as spreads, straddles and collars add another layer: each leg can trade on its own book, but you want one price for the package.

An options RFQ usually follows this path.

1. Define the structure. The client names the underlying, expiry, strike, call or put, side and size for each leg, or selects a standard multi-leg structure.
2. Request. The structure goes to selected dealers, or to a venue's RFQ function, as one request.
3. Package quotes. Dealers return a single net price for the package, which removes the risk of one leg trading and the other not.
4. Accept and hedge. On acceptance the legs execute together. The dealer then hedges its delta, and the client manages its own residual risk.
5. Margin and settlement. Margin, premium payment and exercise follow the venue's or counterparty's terms.

Three points matter when evaluating any platform for this flow. First, can it quote and track multi-leg structures as one package? Second, does it apply limits and risk checks before the quote is accepted? Third, does it keep a complete audit trail of requests, quotes and fills? Mercury OTC materials list support for spot, futures, perpetuals, options and multi-leg structures; scope by asset class is confirmed with the Liquid Mercury team.

Some venues also run their own RFQ functions alongside their order books. For example, Deribit offers block and RFQ workflows for options. A desk that connects to several venues can ask for quotes in more than one place and compare them. The practical side of venue connections is covered in crypto venue connectivity.

Where an RFQ network fits

An RFQ network connects the party asking for a price with several parties able to give one. For a broker or desk, the value is competition and reach: more dealers see the request, and the client can compare responses without calling each one.

Liquid Mercury's RFQ network approach has two sides, depending on who you are.

• If you run a desk or brokerage, Mercury OTC lets you quote your own clients by RFQ, RFS or streaming prices, with single-dealer, multi-dealer or hybrid pricing. In a multi-dealer setup, the platform collects competing quotes from your liquidity providers and presents the result under your own brand. See Mercury OTC.
• If you trade as a buy-side firm, the question is access. Which dealers and venues can you reach by RFQ, and can you make and take requests across them from one interface? Ask any provider for its current list and how it handles quote validity and failed legs.

Supporting tools sit around the request itself. A dealing book can internalize a trade, hedge it, or pass it straight through to another counterparty (back-to-back). Execution algorithms such as OTC posting can work an order through streaming or RFQ workflows against liquidity providers; see the algo suite overview. Reporting brings compliance, risk and performance into one place.

K33, a crypto broker regulated by the Norwegian Financial Supervisory Authority, used Mercury OTC to automate its RFQ desk across 200 trading pairs and 8 fiat currencies, and its OTC trading volume grew 5x. Read the K33 case study.

Risks to weigh

• Counterparty and settlement risk. A firm price is only as good as the settlement behind it. See counterparty risk in digital asset OTC trading.
• Information leakage. Asking many dealers reveals your interest to many dealers. Choose the number deliberately.
• Last look and quote validity. Ask whether a quote can be withdrawn after you accept it, and what the validity window is.
• Hedging risk for the dealer. Wide spreads in stressed markets reflect real hedging cost, not only margin.
• Operational risk. Manual voice and chat processes add hand-offs where errors and delay enter.