The central role of the Liquidity Provider

The Request for Execution (RFE) market model assigns a central role to the Liquidity Provider in trading. In particular, it's important to note that:

1. There is always a Liquidity Provider (LP) for each instrument
2. A contract can only be concluded within the bid and ask quotes of the LP
3. In the absence of the LP from the order book, the instrument is automatically suspended
4. The LP has several functionalities and commands to facilitate trading activity, including RFE, KOBI, KIBI, PAKO, RFE, LP command, and Bid-Only Before Buy-Back, to name a few.

In detail, the automatic suspension of instruments occurs when both quotes are missing, or only one quote is absent, and the LP has not declared themselves in bid only. During the suspension, it is possible to enter, modify, and cancel orders. Trading automatically resumes whenever the LP restores the quotes.

In addition to the role of the Liquidity Provider, the RFE model allows for two additional figures to support the liquidity of individual instruments:

• Secondary Liquidity Provider: an additional LP that acts with the issuer's consent in bid & ask or, if necessary, in bid only
• Market Maker (only for the SeDeX market): A MiFID II Market Maker that acts without the issuer's consent and only in bid & ask. 

You can find the list of associated Market Makers for each instrument at this link.

Now, let's examine what happens in trading when the LP quotes an instrument in bid only.

When an LP voluntarily quotes in bid only, trading of the instrument continues regularly. To meet the market requirement of executing a contract within the bid & offer quotes of the LP, and in this case, with the absence of the offer quote, the Market automatically calculates a Virtual Offer Price (VOP).

The VOP is a virtual offer price calculated based on the rules defined in the Parameter Guide, and it serves to establish a maximum execution limit for contracts based on the bid price exposed by the LP. For more details on how the VOP is calculated, please refer to the Guida ai Parametri.