Over The Counter Definition – What is OTC? | CFI

over the counter (otc)

OTC trading, also known as over-the-counter trading or off exchange trading, describes a transaction that is not conducted via a formal exchange. OTC trading creates plenty of opportunities for traders to partake in the forex, commodities, indices, and equities markets although it does carry a higher amount of risk than traditional investing which you should be aware of. OTC trades are executed via a dealer network and involve two separate parties.

 

The most common OTC market is the foreign exchange (Forex or FX) market, where currencies are traded 24 hours a day, 5 days a week via a network of banks and brokerages, instead of on traditional exchanges.

 

OTC trading can also include stocks, derivatives, and commodities.

 

Example of over the counter (otc) trading:

 

While there are some similarities, there are plenty of differences when you compare the OTC market with exchange trading. On a more traditional exchange, like the New York Stock Exchange, for example, you will see multiple buy and sell prices from various parties. However, with OTC trading, you will carefully choose one broker who you believe will offer you the best all-around trading conditions and go with the buy and sell prices they provide.

 

Key takeaways:

 

  • Otc trading is more flexible than compared to more standardized and regulated exchanges
  • Otc trading increases financial market liquidity, as companies that cannot trade on the formal exchanges gain the opportunity for exposure
  • Otc trades have greater flexibility but are also considered riskier
Credit Financier Invest (Mauritius) Ltd is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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Important Disclaimer:


We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest (Mauritius) Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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