Topic Hub · Market Structure

OTC Trading and Block Execution

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Over-the-counter (OTC) trading lets institutions execute digital asset size bilaterally with a liquidity provider at a single agreed price, off the public order book. This hub covers how OTC desks price and settle block trades, when RFQ beats streaming or exchange execution, and what a desk should ask a counterparty.

Institutional digital asset flow splits into two channels. Small, time-sensitive orders in liquid pairs go to central limit order books, where the visible spread is tight and execution is immediate. Orders that are large relative to displayed depth, that touch thinner assets, or that must not signal intent go over the counter, where a desk prices the whole block and carries the risk of working it.

The articles in this hub explain the mechanics behind that split: how request-for-quote workflows produce a firm price for size, why slippage and market impact are the real cost of a block trade, how settlement completes the trade, and how to evaluate the desks that provide the service. The glossary entries define the vocabulary a desk uses when it quotes.

Articles in This Topic

Comparisons

Comparison

RFQ vs. CLOB for Digital Asset Execution

RFQ vs. CLOB for institutional digital asset trading: price discovery, information leakage, order size, settlement, and when each execution model is right.

Solutions

Key Terms

Block Trade
A block trade is a single transaction that is large relative to the liquidity visible on public order books, executed bilaterally with a liquidity provider at one agreed price rather than worked through the market. In digital assets, blocks are usually executed through an OTC desk's request-for-quote workflow.
Counterparty Risk
Counterparty risk is the risk that the other party to a trade or a custody arrangement fails to meet its obligations, whether through insolvency, operational failure, or fraud. In digital asset markets it covers exposure to exchanges, OTC desks, custodians, and settlement providers, managed through due diligence, exposure limits, and settlement design.
Dark Pool
A dark pool is a trading venue that matches orders without displaying them to participants before execution, so that institutions can trade blocks without revealing size or intent to the wider market. Digital asset dark pools bring the model from equities to crypto, matching participants with each other rather than against a single dealer.
Liquidity Provider
A liquidity provider is a firm that stands ready to buy or sell digital assets to counterparties on demand, whether by quoting on venues as a market maker, streaming executable prices to clients over an API, or pricing blocks through an OTC desk. The term covers the full set of services that supply immediacy to institutions.
OTC Desk
An OTC desk is a trading service that executes digital asset trades bilaterally with institutional clients, quoting a firm price for the full size through a request-for-quote workflow over private channels and settling on pre-agreed terms. It absorbs the market impact of blocks that would move a public order book.
Pre-Funding
Pre-funding is the requirement to deposit assets or cash with a venue or counterparty before a trade can execute, so that settlement happens inside the counterparty's books rather than between independent accounts afterward. It is standard on centralized exchanges and is a primary source of counterparty exposure for institutions.
Principal Execution
Principal execution is a trading model in which the liquidity provider is the client's counterparty, buying from or selling to the client from its own inventory at a quoted price and then managing the resulting position as its own risk. OTC desks and market makers execute as principal; the client's cost is the spread on the quote.
Request for Quote (RFQ)
A request for quote (RFQ) is a trading workflow in which a client asks one or more liquidity providers for a firm price on a specified asset, side, and size, then chooses whether to trade at the quoted price within a short validity window. RFQ is the standard way institutions execute digital asset block trades bilaterally.
Settlement Risk
Settlement risk is the risk that one party to a trade delivers its side, the asset or the cash, and the other party fails to deliver, leaving the first party exposed for the full value of what it sent. It arises whenever the two legs of a trade do not move at the same time or under the same control.
Streaming Liquidity
Streaming liquidity is the continuous delivery of executable two-way prices at defined sizes from a liquidity provider to a client over an API, typically WebSocket or FIX, so that the client can trade at any moment without requesting a quote first. It is the electronic counterpart to the OTC desk's request-for-quote workflow.

Frequently Asked Questions

What is a crypto OTC desk?
A crypto OTC desk is a trading service that executes digital asset trades directly with a counterparty rather than on a public exchange order book. The desk quotes a price for the full size, the client accepts or declines, and settlement happens bilaterally. Desks serve institutions that need to trade size without moving the market.
When should an institution use OTC instead of an exchange?
OTC execution suits orders that are large relative to visible order book depth, orders in assets with thin books, and flow that must stay private. Exchange execution suits small orders in liquid pairs where the visible spread is tight and speed matters more than footprint.

Sources

  1. Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies (FIN-2019-G001) — FinCEN, May 2019

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