Information Leak Management:
- Trade information which may speak to the intended price and volume to be executed is very valuable as it may influence market behavior. While a principal based OTC desk such as Kraken’s limits the leak of this information by avoiding intermediaries and utilizing professional techniques, some information may still be conveyed. Dark Pools go one step further. In a truly dark pool, neither the buyer nor the seller are aware of the intended volume or price of the counter party. In such an environment, there is no risk of any market influencing information being accidentally or purposefully disseminated.
- While some OTC desks may have an automated RFQ (Request For Quote) process, this will still be exposed to the risks mentioned above as it will be executed manually by traders. Further, utilizing dark pools allows a client to incorporate automated trading with ease that will operate at all hours of the day and under all conditions without the need for human intervention. There will never be a delay due to a busy desk, on the contrary, a busy dark pool will result in faster execution.
- Dark pools do not have to wait for settlement the same way traditional OTC trades do. While OTC trades are often quickly completed between 20 mins and 2 hours after initiation. Full trade settlement, including funding can sometimes take 24-48 hours. When using dark pools, the trader has a settled position immediately after a match is made.
- The OTC desk is ‘taking’ focused. This means that clients are primarily serviced when they are ready to purchase or sell a set quantity of volume. At this time, the OTC desk doesn’t offer the ability to passively accumulate positions without a definitive volume mandate. Using dark pools allows for the flexibility and possibility of buying/selling a large volume without the need to have a minimum transaction size. This is akin to the perspective of a ‘maker’.
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- The OTC desk offers a high-touch and personalized service. It is very novice friendly and can provide a high degree of comfort, safety, customization and efficiency to those utilizing it.
Execution Risk Management:
- Executing a large volume trade at once can be extremely difficult as its presence may alter the order book. To combat this risk, the OTC desk offers a set price for a set volume. There is no execution risk as there is with the dark pool where the trade may never execute at the price requested or the price may drift away. Clients will get the volume they want at the price they are quoted without any slippage in price or volume.
- The OTC desk is very effective and efficient. It is able to offer more volume than the clients can see quoted in the order book which translates to consistently better total prices. By utilizing our OTC desk, clients can leverage our expertise to achieve better prices more quickly and easily.
Fee Inclusive Pricing:
- For trades at or greater than $100,000, the price quoted by the OTC desk includes all fees. There is no need to worry about calculating the cost of additional trading/other fees
Benefits of a Principal Desk v. Non-Principal:
- The advantage of utilizing a principal based desk like that of Kraken, also means that the client receives their quotes more quickly and at sharper prices because unlike non-principal desks, there isn’t an intermediary. The order isn’t being shopped around to other traders or OTC desks. This results in faster service and at better prices for clients.
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