Everything You Need to Know About OTC Derivatives Market
What is Over-the-Counter? Trading between two parties that does not take place on a regulated exchange is known as over-the-counter (OTC) trading. Over-the-counter (OTC) trading occurs through dealer networks in the decentralized, online over-the-counter markets. In contrast to trading on regulated exchanges, over-the-counter trading does not restrict itself to the exchange of solely standardized objects (e.g., a clearly defined range of quantity and quality of products). As an additional downside, prices are only sometimes made public. Due to the bilateral nature of OTC contracts, each party may be concerned about the credit risk of its counterparty. Over-the-counter (OTC) securities cover various currencies, commodities, and other assets. Equities, debt securities, and derivatives are examples of OTC financial instruments. Why OTC? 1) It paves the way for private enterprises to transact business without having to become public on a stock exchange. These businesses will have lower fi