Direct Counterparty (DCP) Trading

A direct counterparty, commonly referred to as a DCP, is an institutional investor that trades directly with a market maker like Optiver on an ongoing bilateral basis: the market maker continuously streams two-way prices to the institution, and the institution can act on those prices without going through an exchange or a broker. DCPs include pension funds, asset managers, insurance companies, and sovereign wealth funds. Rather than submitting orders to a public order book where they are matched anonymously, a DCP trades directly with the market maker, which acts as the liquidity provider on the other side of the transaction.

DCP counterparties typically connect to the market maker's liquidity through their existing order management or execution management systems. When the institution decides to trade, the transaction is executed bilaterally: the market maker buys if the institution sells, and vice versa. The trade is then reported to the relevant post-trade infrastructure and settled in line with regulatory requirements. Settlement is handled bilaterally between the two parties, typically through the standard institutional settlement channels already used for their other flow, with custodians and settlement agents moving securities and cash on the agreed value date. Compared with sending an order to a public venue, this route lets the institution agree a size and price directly with a known counterparty, without exposing the interest to the wider market beforehand.

DCP is one of several long-standing channels through which institutional investors access liquidity. It sits alongside exchange trading, wholesale block trading, and RFQ, and has existed in various forms for decades. Institutions use DCP when they want continuous, streamed liquidity from a specific market maker rather than one-off quotes on demand. The distinction with RFQ is straightforward: DCP gives the institution a live, continuously streamed two-way price it can act on at any moment, while RFQ is an on-demand model in which the institution asks for a quote each time it wants to trade. The practical benefits compared with order-book trading include reduced market impact, because the trade does not appear on the public book until after execution, access to larger quote sizes, and greater price certainty on execution.

Optiver provides continuous two-way pricing across global equities, ETFs, and options to its DCP counterparties, covering a broad set of large-cap and index-level instruments.

Suppose a large asset manager wishes to sell 800,000 shares of a major European stock, roughly 4% of the stock's average daily trading volume. Selling this quantity through the public order book would likely move the price downwards as the order was progressively filled. The asset manager connects to the market maker's DCP stream via its execution management system. The streamed price is €45.10 bid / €45.18 offer, in a size of 600,000 shares. The asset manager hits the bid for 600,000 shares at €45.10, €27,060,000 in total, in a single price-certain transaction with no market impact before execution.

Institutions that prefer one-off request-based quotes rather than a continuously streamed relationship typically use RFQ instead. For more on that model, see our explainer on Request for Quote (RFQ).