A lot of effort goes into updating option quote prices when the underlier price changes, with market makers scrambling for the faster code possible and all before arbitrage seekers catch them with the pants down (quoting an outdated option price which can be arbitraged by the new underlier price). But, what if instead quoting in price, one would quote options in volatility? There would be waay less movement required on part of option qotes at various strikes, only thing that matter being underlier price, which is just one, not hundreds of strikes to update. How would an execution look like when you got no price to begin with? A pair: (underlier, volatility) priced at Black-Scholes valuation. Volatility would be pretty much constant at a given strike and the only variable to optimize for would be another market for the underlier.
Breaking news! OTC markets have been quoted in vol for decades. Thanks for playing. Does nothing to improve latency or requotes. Vols and prices are on your frontend and MMers are bots (like your account here).
Well yeah, but stream directly vol quotes? I don't know about that. @demoncore Can you please give an example of such OTC market?
CME had volatility quoted fx options. https://www.cmegroup.com/education/files/volatility-quoted-options-overview.pdf And as democore stated, otc fx and swaptions are quoted in vol and delta