OTC trading explained

If you’re here, you must have heard the term “OTC” around and you’re curious to understand it. You’re in the right place.

OTC stands for “Over-the-Counter” and it’s a form of trading that takes place directly between two parties, typically a trader and a broker. Unlike trades that are done through an exchange, OTC trades are not frequent and are done privately outside of a public exchange orderbook. 

But why are OTC trades private? There are two main reasons for this. One, OTC trades tend to be large in value and can therefore impact the market price, also known as price slippage. A big buy or sell transaction has the power to move market prices rapidly and an OTC trade can prevent that. Two, since OTC trades are usually for big amounts, a direct deal can give the trader the option to negotiate and get better pricing customized for their trade.

Considering the nature of OTC trading, it is primarily used by institutions, investors, and high-net-worth individuals. This gives them the chance to conduct trades privately and negotiate prices and fees, with fast and secure execution as well. 

Any potential risks associated with OTC trades can easily be avoided by conducting OTC trades through a licensed and regulated entity. This is why Rain follows regulatory guidelines by committing to KYC (Know Your Customer) and AML (Anti-Money Laundering) policies before executing any OTC trade. This ensures trust and transparency between the two parties. 

If you are interested in conducting an OTC trade through a licensed and regulated platform, you can get started here, and we will be in touch with you within 24 hours with more details.