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Glossary

Over-the-counter (OTC) trade

Definition

A trade that is negotiated between two parties, such as an investment bank and a client, without the use of an exchange. Commodities and instruments are traded directly between the two parties.

This is different from trading on a public exchange, which is an open marketplace.

Over-the-counter products can be tailored to individual clients, whereas exchanges trade standardised contracts.

A large over-the-counter market has grown in, for example, forex and forex options.

Related Items

Direct market access (DMA) Exchange Clearing house Market maker
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