Introduction
OTC trading, or Over-the-Counter trading, is a type of financial transaction that occurs outside of traditional exchanges, such as stock markets. It is a decentralized form of trading that allows two parties to exchange securities without the need for a third-party intermediary. OTC trading is popular for investors looking for fast and flexible investment opportunities, and it can be an invaluable tool for those seeking to access volatile and illiquid assets. CryptoNewsHerald is here to provide insight into the world of OTC trading, from the basics to the most sophisticated strategies.
05/24/2018
BaseTrading and investment
BaseTrading and investment
1
What is OTC trading?
OTC stands for Over-the-Counter, literally meaning bypassing the counter. This term refers to over-the-counter trading carried out directly between clients and market makers. In this case, the seller and the buyer enter into a transaction directly with each other, usually with the assistance of third parties. For a long time, OTC trading has been an important tool in the traditional financial market, but in 2018 it has found wide application in the field of cryptocurrencies.
2
Why do market participants choose OTC trading?
Market participants may move away from traditional exchanges in favor of OTC for a number of reasons, including price stability, speed of execution, security, and privacy.
3
How is OTC trading different from stock trading?
In the course of trading on the stock exchange, in order to carry out a large transaction, it is usually necessary to make many small transactions, and the rate in each may vary. Liquidity and volatility at that time determine the number of transfers needed, as well as the spread of rates. Price fluctuations commonly seen in the cryptocurrency market can significantly increase trading costs and harm market participants.
With OTC trading, clients are limited to one large trade, which improves efficiency and avoids the hassle of cross-exchange execution. In addition, the transaction is not recorded in the order book of the site and is not displayed publicly, which allows you to achieve a higher level of confidentiality.
4
What does OTC trading have to do with token sales?
5
How does the demand for OTC change over time?
In the world of cryptocurrencies, OTC trading has long been the domain of big players and whales, but a number of factors have driven the recent rise in interest and wider adoption of OTC in the industry. Mainstream cryptocurrency exchanges are currently known for their huge lists of unverified users, so OTC trading services are beginning to actively occupy the niche of “middle” market participants with orders of $100,000 and above. This is especially true given the complexity of depositing and withdrawing fiat funds from exchange accounts and constantly changing regulatory frameworks. After the regulatory field becomes more defined, large players will need tools that have the attributes of liquidity and risk management of the OTC market.
6
What impact does regulation have on OTC trading?
As cryptocurrencies face regulation, security advisories and other tests, they will become more prepared to compete within traditional investments. The growth in demand at the institutional level requires deeper and more permanent liquidity. Oftentimes, cryptocurrency exchanges cannot meet these liquidity requirements, giving further impetus to the expansion of the OTC trading market.
7
How to choose an OTC trading provider?
OTC firms provide solutions for liquidity, pricing, and information issues. This focus on delivering a single price or solution and individual work with each customer creates a customer-centric environment that allows the service to expand in new directions, from escrow to lending and syndication.
The best OTC providers adapt to emerging and uncertain markets with a balance of confidence and humility to offer consistently competitive services and liquidity to their customers.
A key factor when comparing providers should be their ability to transact in high growth markets defined by high volatility, illiquidity and algorithmic trading prowess.
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Conclusion
OTC trading is a way of trading securities outside of a traditional exchange. It can be beneficial for investors who want to make large trades quickly, as well as those who want to invest in smaller companies or in more illiquid assets. OTC trading is an essential part of the financial markets, providing investors with the opportunity to diversify their portfolios and to access broader markets. This has become increasingly important as the global financial landscape continues to evolve.
FAQ
What is OTC trading?
OTC trading stands for “over-the-counter” trading, which is a decentralized method of securities trading that occurs directly between two parties. OTC trading is generally used for stocks and bonds that are not listed on a public exchange. It involves higher risk and higher rewards, since the two parties are essentially trading directly with each other.
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