This article has been translated from English to Gen Z Slang.
OTC trading, a.k.a. over-the-counter trading, is basically when you do business on the DL and not on a fancy formal exchange. 😎
Instead, it’s like a lil' secret handshake deal between two parties, often hooked up through a dealer network.
It’s like a wild west out there—less rules, more vibes. This brings along a bucket of opportunities, but you gotta watch out for them riskies. ⚠️
When you and your bestie trade OTC with a trading provider, you’re usually gonna see just two prices: a solo buy price, and a lone sell price.
Unlike on-exchange trading where it's a whole party with multiple buy and sell prices from a bunch of different peeps. 🎉
Forex
The GOAT of OTC markets is forex. 🌏
Forex trading also vibes in the over-the-counter scene because trades happen outside of a centralized exchange.
This is what makes it possible for forex fam to hustle 24/7 cuz they're not caught up in the time-zones of formal exchanges like the beloved New York Stock Exchange.🗽
Instead, traders do their thing by buying and selling currencies directly through a network that connects different banks, dealers, and brokers. 💰
Stocks
When it comes to the stocks of the underdogs—small companies, bonds, and other off-grid securities—they can be traded OTC. 📈
In OTC markets, the MVPs known as market makers flex by buying and selling securities from their own stash. 💼
If an investor fam wants to cop or drop certain security, they’d hit up the correct dealer and ask for bae’s bid or ask price. 😉
In the U.S., the OTC Bulletin Board (OTCBB) is the no-cap popular electronic spot where OTC securities swap hands.
The OTCBB, along with other inter-dealer quotation squads like Pink Quote, are kept in check by FINRA, the Financial Industry Regulatory Authority. 📜
Trading stocks OTC is kinda a risky biz cuz these companies don't spill as much tea as the ones listed on exchanges do. 🤷♂️