Over-the-counter markets (OTC)

A dealer market with no central location. Forwards and swaps are traded in OTC markets. The dealer marries the interested parties into a custom, negotiated contract.  Hence, the contract is with a counterparty, which exposes both parties to default risk.  Over-the-counter markets tend to be unregulated and decentralised.

Secondary bond market trading often take place in OTC markets.

Compare: Central exchange

Also Known As:
Dealer market
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