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OTC Trading

OTC Trading

What Is an Over-the-Counter Market?

An over-the-counter (OTC) market is a decentralized market in which market participants trade crypto, stocks, commodities, currencies directly between two parties and without a central exchange or broker. Over-the-counter markets do not have physical locations; instead, trading is conducted electronically.
In an OTC market, dealers act as market-makers by quoting prices at which they will buy and sell products. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was completed. In general, OTC markets are typically less transparent than exchanges and are also subject to fewer regulations. Because of this, liquidity in the OTC market may come at a premium.

Key Takeaways:

  • Over-the-counter markets are those in which participants trade directly between two parties, without the use of a central exchange or other third parties.
  • OTC markets do not have physical locations or market-makers.
  • Some of the products most commonly traded over-the-counter include crypto, derivatives, and currencies.