What is OTC OTC trading?

Over-the-counter trading (OTC) is the trading of financial assets in non-centralized places. Its characteristics include: customized terms, flexible scale, and low transparency. OTC transactions are usually conducted over the phone, through brokers or electronic platforms. Its advantages include strong customization, flexible scale, and good concealment. Its disadvantages include low transparency, poor liquidity, and high fraud risk.

Over-the-counter (OTC)

Definition:

OTC, the full name is OTC, which refers to the process of trading financial assets outside of exchanges or other centralized trading venues.

Features:

• No centralized location: OTC transactions occur between trading parties, not within a designated exchange.
• Customization: The terms of OTC transactions can be customized according to the specific needs of buyers and sellers.
• Flexible scale: OTC transactions can range in size from small to very large.
• Low transparency: The information of OTC transactions is usually not public, resulting in lower transparency than exchange transactions.

How to conduct OTC trading:

OTC trading is usually conducted through:

• Telephone: Traders contact each other directly through the phone.
• Agent: Intermediaries match buyers and sellers and assist in negotiating transaction terms.
• Electronic Platforms: Some platforms allow anonymous trading and provide trade matching services.

Advantages of OTC trading:

• Customization: Trading parties can customize trading terms to meet their specific needs.
• Flexible Scaling: OTC trading allows for large-scale trading, which may not be feasible in exchange trading.
• Concealment: Transaction information is not disclosed, providing privacy protection for transaction parties.

Disadvantages of OTC trading:

• Low transparency: The lack of transparency in trading information increases the risk of market manipulation and price fraud.
• Low Liquidity: OTC market liquidity is generally lower than exchange markets, which can lead to delays in trade execution and price fluctuations.
• Fraud Risk: Due to the lack of regulation and transparency, OTC trading is at risk of fraud and default.

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