Order Flow Auction

Definition ∞ An order flow auction is a mechanism where the right to execute user trade orders is sold to market makers or other liquidity providers. In the context of digital assets, this can occur on decentralized exchanges or through specialized protocols. The process aims to provide better execution prices for users by creating competition among those fulfilling trades.
Context ∞ Order flow auctions are a subject of considerable discussion in the digital asset trading landscape, particularly regarding market fairness and transparency. News reports sometimes scrutinize the potential for information asymmetry or front-running within these systems. Ongoing efforts seek to optimize order flow auction designs to ensure equitable trade execution and market efficiency.