Pricing Methodology
1. Introduction and Regulatory Basis
1.1 This Pricing Methodology (this "Methodology") is issued by DRW Europe BV ("DRW Europe" or the "Firm"), a company incorporated in the Netherlands and authorised by the Autoriteit Financiële Markten (the "AFM") as a crypto-asset service provider ("CASP") pursuant to Regulation (EU) 2023/1114 of the European Parliament and of the Council (the "Markets in Crypto-Assets Regulation" or "MiCA").
1.2 DRW Europe is authorised to provide the following crypto-asset services:
(a) exchange of crypto-assets for funds or other crypto-assets (the "Exchange Service"); and
(b) execution of orders for crypto-assets on behalf of clients (the "Execution Service").
2. Scope of Services
2.1 DRW Europe provides its Exchange Service and Execution Service exclusively on a bilateral, over the counter ("OTC") basis. DRW Europe acts as principal in all transactions with its clients. It does not operate a trading platform for crypto-assets and does not route orders to any trading platform or other crypto-asset service provider for execution.
2.2 DRW Europe will only trade crypto-assets that have been approved by its internal review process.
2.3 The Firm's Commercial Policy sets out the type of clients with whom DRW Europe agrees to transact and the conditions that must be met by such clients. DRW Europe provides services exclusively to institutional clients. It does not onboard or offer liquidity directly to retail clients.
2.4 Further information on how the Firm provides the Exchange Service and the Execution Service can be found in DRW Europe’s Execution Policy.
3. Determination of Price Quotes
3.1 DRW Europe’s price quotes for spot crypto-asset transactions may be above or below a composite fair-market midpoint value calculated by DRW Europe using proprietary models (“Composite Midpoint”). DRW Europe's proprietary pricing is based on multiple data feeds from pricing sources globally, including indices, crypto-asset trading platforms, crypto-asset pricing services, and other pricing sources or methodologies.
3.2 The Composite Midpoint represents DRW Europe's view of the fair-market midprice for a given crypto-asset at a given point in time and serves as the reference point from which DRW Europe constructs the prices quoted to clients.
3.3 The difference between the Composite Midpoint and the quoted price is the "spread”. The “spread” between the Composite Midpoint and the quoted price may vary over time based on factors, including but not limited to, market volatility, trade size, targeted positions, availability of coin borrows, and overall liquidity of a specific crypto-asset(s).
3.4 The prices quoted to a client by DRW Europe are all-in prices. Beyond this “spread”, DRW Europe does not impose any additional fees, expenses, or charges for transactions.
3.5 DRW Europe will not charge commission unless required to do so by its client.
4. Impact of Market Volatility on Price Quotes
4.1 Market volatility is a direct input into the spread DRW Europe applies to the Composite Midpoint, and therefore the price quoted to a client.
4.2 During periods of increased volatility, the fair-market value of a crypto-asset can move rapidly and unpredictably, increasing the risk DRW Europe assumes as principal between quoting a price and managing the resulting position. To reflect this increased risk, the spread applied to the Composite Midpoint may widen during volatile market conditions and may narrow during less volatile conditions.
4.3 Volatility also compounds the effects of other variables (i.e., trade size); a large transaction in a less liquid crypto-asset during a volatile period may attract a wider spread than the same transaction would attract during less volatile conditions.
5. Impact of Trade Size on Price Quotes
5.1 Trade size is a direct input into the spread DRW Europe applies to the Composite Midpoint, and therefore the price quoted to a client.
5.2 Larger transactions consume available liquidity and may carry greater market and inventory risk for DRW Europe as principal. As trade size increases relative to the overall liquidity of the specific crypto-asset, the spread applied to the Composite Midpoint may widen accordingly to reflect the additional risk and the cost of sourcing or selling the relevant quantity of the crypto-asset.
5.3 Trade size also interacts with DRW Europe's targeted positions and the availability of coin borrows for the relevant crypto-asset. Where executing a transaction would move the Firm away from its targeted positions, or where the relevant coin borrows are less readily available, the spread applied to a given volume may be wider. Conversely, where a transaction is consistent with the Firm's targeted positions, the spread applied may be tighter.
5.4 DRW Europe may set limits on the total notional amount it will execute with a client over a defined period. Such limits will be communicated to clients on request.
6. Client-Specific Pricing
6.1 The price that DRW Europe quotes can vary per client notwithstanding the same market conditions for the same crypto-asset. DRW Europe takes into account the client's credit risk, settlement reliability, typical trade size requirements and other relevant factors when calculating a price for that client.
9. Changing or Updating Price Quotes
9.1 As set out in its agreement with the client, DRW Europe has the right to change or update its price quotes at any time.
9.2 Under exceptional market conditions, including but not restricted to where the Firm's ability to maintain prudent risk management practices is impeded by technological issues, risk management issues or margining, or during planned or unplanned maintenance of systems, DRW Europe may withdraw its quotes or streaming entirely.