Over-the-counter trading happens when two parties deal with each other instead of matching through a public exchange. Bonds, currencies and some specialised products often trade this way. Prices may be less transparent than on an exchange, and settlement terms are agreed between the counterparties or their brokers.

Key takeaways

  • OTC means off-exchange, peer-to-peer style dealing.
  • It can offer flexibility but often less price visibility than listed markets.
  • Counterparty risk matters more when there is no central clearing house.
  • Many retail investors stick to exchange-listed shares for clearer rules and pricing.