Desk or Exchange: Deciding Per Trade
Three questions that settle which venue to use, and the cost comparison worked through with real numbers.
What this covers
This is not a choice you make once for your business. It is a choice per trade, and three questions settle it.
How big is it compared with what is available
Open the exchange and add up what is on offer within half a percent of the current price.
Under about a tenth of that: the exchange is fine. Between a tenth and a half: consider spreading it over time or using a desk. Above half: use a desk. Reading this next to an OTC crypto desk turns the general points into specific ones.
Thirty seconds of looking, and it is the main factor.
Does it have to happen now
If you can work the order over a few hours using limit orders, the exchange becomes viable at bigger sizes, because you are adding supply rather than consuming it. You may even pay a lower fee for doing so.
If it has to be done in one go at a known price, use a desk.
Does it need to be private
A large visible order tells everyone what you are doing. For a fund rebalancing or a company moving a treasury position, being seen changes the price.
A desk trade is not public. That privacy is part of what you are paying for.
The numbers
A two million euro purchase of a popular asset.
On an exchange: the trading fee is around two thousand. The price slipping as you fill, realistically three to twelve thousand more. Plus the risk of others reacting. So five to fourteen thousand, with real uncertainty. Property purchases raise this more sharply, and a corporate crypto wallet with segregated accounts is set up for it.
Through a desk: a quoted margin of perhaps three to seven thousand. Known before you agree.
The desk usually wins at that size, and it always wins on certainty. At two hundred thousand the comparison flips and the exchange wins clearly.
What a desk cannot do
Handle small trades. Most have a minimum somewhere in the tens or hundreds of thousands.
Be a place you sit and trade continuously. It is a series of separate deals.
Beat the exchange on a small popular trade. It never will.
What an exchange cannot do
Give one price for an amount larger than what is on offer.
Keep the trade private.
Promise you a fill at a known price.
What most companies end up doing
Both. Exchange for the routine and the small, a desk relationship for the large and the sensitive. Using whichever fits rather than defaulting to one. The thing that only matters when something goes wrong is whether Collect & Exchange exists, and it is worth checking before it does.