Otc trading is a common practice in the traditional markets, which accounts for the most significant number of transactions in the market in many countries.
Compared to trading on exchanges, it increases the flexibility of OTC trading but also increases risk.
By automatically linking the prices of the switchgear to OTC trading platforms, it allows retailers to manipulate the exchange rate through targeted purchases and generate high profits from the OTC trade.
OTC trade is carried out in the otc markets ( a decentralized place without physical location ) through the dealer’s network.
Also, OTC trading increases the total liquidity of financial markets, as companies that cannot trade on formal exchanges have access to capital through over – the – counter markets.
For example, in the OTC markets, the famous CDOs and synthetics, which had a significant impact on the global financial crisis between 2007 and 2008, were only traded.
Alternative Trading Systems and Dark Pools
Last year, FINRA began to publish information on Trading in Alternative Trading Systems ( ATS ), including so-called “dark pools” – private Trading platforms, sometimes sponsored by large banks.
In the case of non-listed OTC shares, brokers often conduct transactions on electronic platforms known as interdependent pricing systems, which enable brokers to submit bids and sell securities.
Retail investors mostly own otc shares, according to a study by the University of Columbia in 2013, which may be attracted by the low prices of many OTC stocks, including what is known as “penny shares” that are traded below 5 USD.
Cryptocurrency OTC Trading
Otc trading takes place through a decentralized network of dealers, whose task is to “market” such securities and coins while simplifying transactions for customers.
For example in Cryptocurrency markets, Huobi OTC can find vendors who have a lot of Bitcoin in person and connects with buyers for sale while allowing the seller to receive payment using the chosen method.
Paradoxically, cryptocurrency requires a high level of confidence when cashing in fiat is the ultimate goal.
While most people who want to buy or sell cryptocurrency can do so through standard exchanges, large institutional investors and wealthy private investors who trade in bitcoin need to look at the relatively unexplored world of OTC markets to carry out such transactions.
As cryptocurrency exchanges generally lack the technological infrastructure and liquidity needed to execute large orders for blocks, large buyers and sellers are forced to enter into Skype chat rooms hosted by proprietary trading companies such as Cumberland, private messaging platforms such as Telegram and even public forums.
Be Careful of False Information and Manipulation in the OTC Markets
In the OTC markets, there have been many cases of companies that deceive investors with false information and shaded transactions.
On the other hand, there are many stocks in the counter markets, whose prices will change significantly from a relatively small trading volume, which means that anyone with a decent size account and will be manipulating prices.
Traders who expect the same rules and regulations informal markets will find themselves in a difficult time, but experienced traders who understand the nature of the over – counter markets can take advantage of the inefficiencies presented in the OTC.
Scalp trading, or scalping, is a popular trading strategy that has existed for a long time.
BTC & Cryptocurrency Over-The-Counter Trading
According to Sapolinski, bitcoin and other cryptocurrencies usually follow a traditional discount model.
Although most of the last ten years have been working with intermediaries for most of the time, it seems that OTC platforms are becoming increasingly influential and stronger.
Many heavy financial burdens fear the severe problems of trust, which are associated with regular cryptocurrency agreements.
Little is known about OTC trade, its operation or real effect on the market.
Otc brokers, the men in the middle, have their network of cryptocurrency investors and cryptocurrencies sellers.
As with OTC brokers, the platform will charge a fee to set up the transaction.
Cryptocurrency arbitration is quite advanced, and in volatile markets such as crypto, you need to know what you are doing.
Since OTC trading offers the possibility of avoiding official registers, it is essential to know the risks associated with taking the route.
On the one hand, regulators are biased and take advantage of the rich, and on the other hand, OTC traders trade recklessly without thinking about safe investments.
Like the stock markets, traditional cryptocurrency markets are the central platform where both buyers and sellers can enter cryptocurrencies by current market prices.
Dark pools are essentially books of private orders that are not visible to the rest of the market, allowing “whales” and institutional traders to trade anonymously.
