Over the counter (OTC)

A trade that is negotiated between two parties without the use of an exchange.

For example, a security that is not traded on an exchange is known as an OTC security. It is a market where commodities and instruments are traded directly between two parties, for example, between an investment bank and a client.

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

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

A large over-the-counter market has grown up in, for example, Forex and Forex Options.

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