The Bitcoin WorldA division of Global Digital Treasury

Best execution for corporate Bitcoin trades

By Muhammad Bana4 min readOTC & Liquidity
Key takeaways
  • Best execution means taking reasonable steps to get the best overall result for the company, weighing price, cost, speed, certainty and settlement risk, not price alone
  • A short written execution policy sets the factors, routes and benchmarks in advance so each trade can be judged against a standard
  • Evidence comes from consistent records: competing quotes, execution reports and a periodic review of results by provider

Best execution for Bitcoin means taking reasonable, documented steps to get the best overall result for the company on each trade. Price matters, but so do total cost, speed, the likelihood the trade completes and the risk carried during settlement. A company that writes down how it weighs those factors, and checks results against them, can show its board and auditors that trades were handled properly.

Where the idea comes from

Best execution is a long-standing principle in regulated securities markets. Investment firms executing client orders are generally required to take sufficient steps to obtain the best possible result, considering factors such as price, costs, speed, likelihood of execution and settlement, size and the nature of the order.

A company buying Bitcoin for its own balance sheet is not usually the regulated party in that sense. The principle still transfers well. The finance team is acting on behalf of shareholders, and the board will reasonably ask how it knows trades were done well.

Note that the regulatory protections may not apply in the same way to your provider. Ask each provider whether it owes you a formal best execution duty and in which capacity it acts. See principal vs agency OTC execution.

The execution factors

Factor What it means for a Bitcoin trade When it weighs most
Price Average price achieved against the mid at decision time Always, but rarely alone
Explicit cost Commission, settlement and network fees Smaller, frequent trades
Market impact Price move caused by the order itself Orders large relative to depth
Speed Time from decision to completed execution Volatile markets, or a firm deadline
Certainty of execution Likelihood the full size is filled at the expected terms Large one-off allocations
Settlement risk Exposure to the counterparty until both legs complete Pre-funded trades, new counterparties

The weighting is a judgement. A modest monthly purchase may prioritise low explicit cost. A large one-off allocation approved by the board may prioritise certainty and low settlement risk over the last basis point of price.

Writing an execution policy

A best execution policy for a corporate Bitcoin programme can be short. Two pages is often enough. It should sit beneath the Bitcoin treasury policy and cover:

  • Scope. Which trades it applies to: purchases, sales, rebalancing.
  • Factor priority. How price, cost, speed, certainty and settlement risk are weighed, with any differences by order size.
  • Approved routes. The execution methods permitted: firm quote via RFQ, worked orders such as TWAP or VWAP, and negotiated block trades.
  • Approved providers. The onboarded counterparties and the limits for each.
  • Competition. The order size above which competing quotes are required, and how many.
  • Benchmarks. Which benchmark applies to each route, set before the trade.
  • Records. What must be kept for each trade.
  • Review. Who reviews results, how often and what triggers escalation.

CFO tip: set the benchmark at the moment the order is approved, and record it in the approval itself. It removes any later temptation to choose the benchmark that flatters the result.

Evidencing best execution trade by trade

For each trade, the file should allow someone who was not there to reconstruct the decision.

  • The approval: who approved, when, within which limit.
  • The competing quotes, or the reason competition was not used (for example, a worked order with one agent).
  • The execution report, with timestamps, average price, costs and the benchmark result. See what a Bitcoin execution report should contain.
  • The settlement record: bank reference, transaction ID and reconciliation.
  • Any exceptions: re-quotes, partial fills, delays and how they were handled.

This is the same discipline applied to foreign exchange or money market trading in a well-run treasury. Bitcoin does not need a new philosophy, only consistent records.

Reviewing results over time

Single trades are noisy. One good or bad result says little about a provider. A periodic review, quarterly for active programmes, looks for patterns.

Useful measures include:

  • Average cost against arrival price, by provider and by route.
  • How often the winning quote came from each provider.
  • Hit rate on competing quotes: how often a provider's quote was the best when asked.
  • Settlement performance: deadlines met, delays and failed settlements.
  • Quality and timeliness of reports.

A provider that is rarely competitive, or whose worked orders consistently land on the wrong side of the benchmark, should be challenged or rotated. Rotation is easier if more than one provider is already onboarded, as covered in how to choose a Bitcoin liquidity provider.

Common gaps

The usual weaknesses in corporate Bitcoin execution are procedural, not technical:

  • Only one provider asked, with no record of why.
  • No benchmark recorded before the trade.
  • Costs taken from the provider's summary without reconciling to cash paid.
  • Settlement exposure ignored in the comparison of quotes, so a slightly better price on pre-funded terms beats a safer DvP quote without discussion.
  • No periodic review, so poor results persist unnoticed.

Each of these is easy to fix with a template and a calendar reminder. A one-page trade ticket that requires the benchmark, the quotes received, the settlement model and the approver before execution closes most of the gaps at once, and gives auditors a consistent document to test. Companies should take their own legal advice on any regulatory duties that apply to them or their providers.

How The Bitcoin World helps

We draft execution policies for corporate Bitcoin programmes, run competitive pricing on each order, set benchmarks in advance and review results across providers for the finance team and board. Execution, custody and settlement are carried out by licensed third-party institutions. See our OTC liquidity and corporate treasury services.

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