Why RFQ is Essential in Institutional Crypto Markets

Why RFQ is an essential workflow for institutional trading

The structural integrity of global capital markets relies upon the efficient mediation of liquidity between diverse participants, ranging from large asset managers, pensions and sovereign wealth funds to hedge funds and high-frequency trading firms. Institutional trading does not rely on a single execution model. Central limit order books, where prices tick up and down in rapid succession on public exchanges, are important for price discovery and continuous trading. But when institutions need to trade in size, manage information leakage or trade asset classes that have a large number of instruments (each with insufficient liquidity to trade on a central order book), they often turn to a request-for-quote (RFQ) protocol.

For an asset manager attempting to rebalance a portfolio involving hundreds of millions of dollars in notional value, a public exchange is likely to lack the requisite depth to execute the trade without causing significant price slippage. The RFQ workflow emerged for instances where continuous anonymous order-book trading was not the best fit for institutional execution sizes.

In a transparent limit order book, placing a large order acts as a public signal to the market, potentially allowing other market participants to front-run the order and push the price higher before completion – a phenomenon known as adverse selection that increases the cost of execution. The RFQ workflow mitigates this by allowing the trader to send a quote request to known counterparties. By not revealing their intent to the entire market, institutional traders can secure a firm price for the entire block size, shifting the risk of price volatility onto the market makers who are better equipped to recycle that risk across multiple venues over time. 

At a practical level, RFQ helps institutions:

• Source liquidity without exposing full trading intent to the broader market
• Compare pricing across multiple providers in a structured way
• Execute large or specialized transactions within a more controlled workflow

The evolution of electronic RFQ in traditional markets 

The first electronic multi-dealer RFQ protocol for US Treasuries was introduced in 1998. Before this, the fixed income market was largely opaque, relying on fragmented bilateral phone conversations that lacked competitive dynamics and left no digital audit trail. The RFQ model allowed institutional takers to simultaneously query multiple makers (liquidity providers), creating a competitive private auction that ensured best execution while preserving the discretion required for block trading. 

From there, RFQ trading was adopted for mortgage-backed securities, interest rate swaps, equity  and credit derivatives, and by 2012, institutional ETFs – all asset classes where traders often need to source liquidity for larger, more complex or more customized transactions than a standard on-screen order can easily handle.

How RFQ advances institutional digital asset markets

Institutional participants in digital assets face many of the same execution challenges that shaped market structure in traditional finance. They may need to trade in block size, work across fragmented liquidity sources, manage slippage, reduce signaling risk or execute baskets and multi-leg transactions with greater precision. 

When institutions need to move size without directly affecting public markets, a bilateral quoting workflow can be a better fit than posting visible orders to an exchange. An institutional RFQ platform can help replace fragmented, manual processes with a more standardized execution model. Instead of managing quotes through chats, voice channels, spreadsheets and disconnected systems, traders can request, compare and execute quotes in a workflow that is easier to monitor, analyze and connect to downstream operations.

The relevance of RFQ workflows in digital assets can be seen across spot blocks, including ETF issuer create/redeem workflows, as well as OTC derivatives. 

Spot block trading

For spot block trading, the Talos RFQ platform allows a trader to initiate a request for a specific amount of bitcoin or ether. The system then routes this request to a pre-selected group of market makers who respond with two-way quotes. The institution can then execute against the best available price with a single click, knowing that the trade will be settled off-exchange, thereby avoiding any disruption to the public order book price.

ETF issuer create/redeem workflows

In 2025, Talos launched an RFQ platform specifically designed to support the create/redeem workflows required by crypto ETF issuers. This platform was first utilized by BlackRock's traders, integrating the Talos Order and Execution Management System (OEMS) directly with BlackRock's Aladdin, the gold standard for traditional investment management.

In ETF markets, primary-market activity depends on workflows between issuers, authorized participants and liquidity providers. And as ETFs become multi-token and more complex, the importance of standardized quoting, benchmark alignment and basket-based execution workflows grows for the issuers and their trading counterparties. 

When an ETF issuer like BlackRock needs to create new shares, they must acquire the underlying crypto asset. They do this by sending an RFQ to a network of approved liquidity providers. The efficiency of this process, and the tightness of the bid-ask spread, is dependent on the competitive pricing dynamic enabled by the platform. 

OTC derivatives trading

The institutional demand for digital assets extends into the complex world of derivatives, including options, perpetual swaps and futures spreads. In these markets, the RFQ model is preferred over traditional order books for its ability to handle large sizes as well as multi-leg strategies with atomic execution. 

The core advantage of an RFQ in the context of multi-leg strategies is the elimination of leg risk. In a standard order book, a trader attempting a two-leg strategy must execute them separately. If the market moves between the first and second trades, the hedge is broken. With an RFQ, the liquidity provider quotes a single, net price for the entire package, and both legs are executed simultaneously in a single transaction. 

What institutions should expect from an RFQ platform

As more institutional firms adopt RFQ workflows in crypto, the conversation shifts to infrastructure. The real value of a platform is not only the ability to request a quote, but also the ability to manage the workflow in a standardized, auditable and integrated way.

The Talos RFQ platform offers these most important capabilities including:

• Support across spot, derivatives and baskets
• Consistent quote collection and comparison
• Benchmark-aligned quoting for certain workflows
• Integration with OMS, PMS, custodians, fund administrators and settlement systems
• Post-trade visibility and performance analysis

Institutional adoption requires more than access to liquidity. It requires a way to operationalize trading, connect front-office decisions with post-trade processes and support multiple institutional execution methods.

The next evolution: An institutional lending marketplace

The most transformative application of the Talos RFQ platform currently on the horizon is its expansion into the institutional credit markets. Currently, the lending and borrowing of digital assets is a largely manual, bilateral process characterized by opaque collateral management and inconsistent interest rate discovery. Talos is developing a marketplace model that will apply the same RFQ infrastructure, with richer negotiation workflows, to the lending of digital assets.

Related links:

• Learn more about the Talos RFQ platform → 
• Learn about Talos for ETF Issuers →
• Read: “Navigating the Emergence of Actively Managed, Multi-Asset Crypto ETFs: A Call for Advanced Portfolio Management” → 

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^{Disclaimer: Talos offers software-as-a-service products that provide connectivity tools for institutional clients. Talos does not provide clients with any pre-negotiated arrangements with liquidity providers or other parties. Clients are required to independently negotiate arrangements with liquidity providers and other parties bilaterally. Talos is not party to any of these arrangements. Services and venues may not be available in all jurisdictions.For information about which services are available in your jurisdiction, please reach out to your sales representative.}