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Before getting into the matter, we want to remind you that we are leaving several surprises in our Telegram community and maybe you should go take a look at it.
With that said, let's get into today's topic: the OTC market.
In recent years, the OTC (Over The Counter) market has gained popularity among traders due to its flexibility and customization.
Unlike stock trading, OTC transactions are carried out directly between two parties, without the need for a centralized exchange.
What are OTCs?
OTC operations are those that are carried out without the need for an entity to serve as a bridge between the parties.
Instead of trading on a public market, you can customize your trades and agree to specific terms with your counterparty. Financial instruments traded OTC include currencies, commodities, stocks and derivatives.
Advantages of OTC
One of the main advantages of OTC trading is the flexibility it offers in terms of trade size, timing and price. You can negotiate smaller trade sizes than those offered on the public market and you can agree on specific time frames for delivery of the underlying asset.
And it is possible to negotiate specific prices that are not available on the public market.
You can customize your trades to meet your specific needs and agree to terms that are not available on the public market.
Important point: OTC trading typically has lower transaction costs than on-exchange trading. By trading directly with a counterparty, you can customize your trades to hedge against specific market risks. It is useful, for example, to support you against fluctuations in the exchange rate.
Unlike stock trading, OTC operations are not carried out in a centralized market and are not subject to the same regulation and transparency. Brokers and dealers play an important role in facilitating OTC trading by connecting buyers and sellers.
Types of Assets Available in OTC Trading
Financial instruments traded OTC include currencies, commodities, stocks and derivatives. OTC trading can also provide access to markets that are not available through exchange trading.
To participate in OTC trading, we must meet certain eligibility requirements, such as having minimum capital and complying with certain regulations. The different types of traders who can participate in OTC trading include banks, hedge funds, and individual traders.
Start trading in the OTC market
One of the biggest risks is counterparty risk, which arises when a party fails to meet its contractual obligations. And sometimes, prices of underlying assets can be more volatile in OTC trading than in the public market.
Although OTC trading is not subject to the same regulation as stock exchange trading, it is still subject to certain regulations and transparency requirements.
Regulators work to ensure that traders are protected from unfair trading practices and fraud.
To start trading under this methodology, research different brokers and dealers to find one that offers reliable and transparent services. And make it intuitive and really comfortable for you.
Remember that you are not alone and you have an active and professional community just one click away. Always paying attention to the news and market movements is crucial because information is power
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Until the next post!
For this article, prompts have been used to request information
interpreted and provided by AI (Google Bard). Written and edited
by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez