Over the counter (OTC)

Many transactions are done privately between counter parties and with no exchange involved.These are known as over the counter, or OTC.

Deals in any security can be done in two ways. One is via a regulated public market such as the London Stock Exchange. But many transactions are done privately between counter parties and with no exchange involved. These are known as over the counter, or OTC.

OTC deals have a number of advantages for each party, including the fact that details of the trade are not published. Furthermore, in many markets OTC deals are subject to less regulatory scrutiny as they are not generally open to the investing public.

However, OTC deals also have their critics, who complain that the existence of 'dark pools of liquidity' large deals being done regularly off-exchange exclude private investors from the best trades.

See Tim Bennett's video tutorial: What is an index?

Recommended

Margin call
Glossary

Margin call

When an investor borrows to bet on markets, they put down a deposit known as “margin”.
2 Apr 2021
Resource curse
Glossary

Resource curse

The term “resource curse” refers to the observation that countries with abundant natural resources also tend to be less economically developed than th…
14 Jan 2021
Balance of payments
Glossary

Balance of payments

The balance of payments refers to the accounts that sum up a country's financial position relative to other countries.
8 Jan 2021
Yield-curve control
Glossary

Yield-curve control

Yield-curve control is when a central bank aims to control long-term interest rates by pledging to buy (or sell) as many long-term bonds as needed to …
25 Dec 2020

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021