Lesson 12: Request for Quote (RFQ) Execution
Promise: Understand how RFQ execution works on Hypercall, why we use it for most instruments at launch, and how it differs from orderbook trading.
What is RFQ?
Request for Quote is an execution model where you ask professional market makers for a price before you trade. Instead of placing a limit order on an orderbook and hoping someone fills it, you request a firm quote and decide whether to accept it.
Think of RFQ like buying a car. Instead of walking into a dealership and paying the sticker price (orderbook ask), you send your specs to multiple dealers and they compete to offer you the best price. You pick the best offer and close the deal.
Why Hypercall Starts with RFQ
At launch, most Hypercall instruments will use RFQ execution. Here's why:
The cold-start problem
New options markets have a chicken-and-egg problem: traders won't come without liquidity, and market makers won't commit capital without traders. RFQ solves this by letting market makers stream indicative prices without committing capital. They only commit when someone actually wants to trade.
Better prices for you
In an RFQ model, multiple market makers compete for your order simultaneously. This competition typically results in tighter spreads than you'd see on a thin orderbook where a single market maker might be the only one quoting.
The transition plan
As instruments gain volume and attract more market makers, Hypercall will transition them from RFQ-only to hybrid (both RFQ and orderbook) and eventually to orderbook-only:
You don't need to know whether an instrument uses RFQ or orderbook. The app handles it automatically. RFQ instruments show a "Request Quote" button instead of a limit order form. The prices you see on the options chain are indicative quotes from market makers.
How RFQ Works (Step by Step)
1. You see indicative prices
Market makers continuously stream indicative bid/ask prices for all instruments they quote. These are the prices you see on the options chain. They're not firm commitments, but they give you a reliable estimate of what a trade will cost.
2. You request a quote
When you tap an instrument and enter your size, you submit a Request for Quote. This is signed with your wallet (EIP-712) and sent to the exchange.
3. Market makers respond
The exchange fans out your request to all eligible market makers. Each one prices your specific trade and responds with a firm quote: a signed commitment to trade at that price within a time window (typically 30 seconds).
Firm quotes are usually tighter (better price) than the indicative prices you saw on the chain, because the market maker knows exactly what you want to trade.
4. You accept the best quote
The app shows you the quotes as they arrive. Each quote shows:
- Cost: the total premium you'll pay (or receive)
- Per-leg pricing: the price and size for each leg of your trade
Tap "Accept" to execute. The trade is atomic: either it fills completely or not at all.
5. Execution
The exchange verifies both signatures (yours and the market maker's), checks margins for both sides, and executes the fill. Your position appears immediately and your balance updates in real-time.
RFQ vs Orderbook: When Each Is Better
What You Need to Know
Indicative prices are estimates
The prices shown on the options chain for RFQ instruments come from market maker streams. They're updated every few seconds and represent what a trade would approximately cost. The actual firm quote may be slightly different (usually better).
Quotes expire
Firm quotes have a time limit. If you don't accept within the window (shown as a countdown), the quote expires and you'll need to request a new one. Market conditions may have changed, so the new quote could be different.
No partial fills
RFQ trades are all-or-nothing. If you request a quote for 10 contracts, you'll get filled for all 10 or none. There's no partial execution.
Your order is signed
Both your quote request and your acceptance are cryptographically signed (EIP-712). This proves that you authorized the trade and prevents anyone from trading on your behalf without your permission.
💡 Tip: Try answering each question yourself before revealing the answer.