Glossary

Over-the-counter (OTC) refers to the trading of financial instruments, such as stocks, bonds, commodities, or derivatives, directly between two parties without the involvement of a formal exchange.

OTC trading is typically conducted through a decentralised network of dealers or brokers, who communicate and negotiate prices directly with one another. OTC markets can be less regulated and more opaque compared to centralised exchanges and may involve higher risks and wider spreads between bid and ask prices. 💸

For example, many smaller companies not listed on major stock exchanges are traded OTC via market makers who facilitate transactions and maintain liquidity for the securities.

Fun fact: The term "over-the-counter" is believed to have originated from the practice of trading shares and bonds over the counter in early 20th-century drugstores and small shops, where stockbrokers and investors would meet to conduct transactions. 🏪📜