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Over the counter (OTC) refers to a decentralised market where traders can buy and sell securities directly between themselves, without the involvement of clearinghouses or exchanges. Trading OTC occurs within a network of brokers, market makers, and dealers, who facilitate the transactions.
Traders can buy and sell a variety of instruments over the counter, such as stocks, bonds, currencies, commodities, and derivatives. However, OTC trading is typically more prevalent for forex and OTC derivatives, such as options and swaps.
In OTC trading, dealers and brokers negotiate directly with each other outside of centralised exchanges, and they come to an agreement on terms such as price, quantity, and delivery. They do not have to follow exchange rules and regulations, and transactions are typically conducted on electronic platforms.
A trader wants to purchase 100,000 euros and sell an equivalent amount of US dollars. They can contact a counterparty, such as a bank, broker, or another forex trader directly, to negotiate a price and execute the trade, given that both parties agree on the terms of trade.
Though OTC trading can be an easy and flexible way for traders to exchange securities, traders must be cautious of counterparty risk. Counterparty risk is the uncertainty that the other trading party will not be able to fulfil their financial obligations. To manage this, traders should work with a licensed broker and diversify their counterparties to minimise the risk of potential losses.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
ts@adss.com
+971 2 657 2414
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities L.L.C – S.P.C (“ADSS”), a limited liability company – sole proprietorship company incorporated under United Arab Emirates law. Registered under Commercial License No.1190047. ADS Securities L.L.C S.P.C is regulated and authorised in the UAE by the Capital Market Authority (CMA) under Category 1 License No.305027 (Trading Broker, Trading and Clearing Broker, Trading Broker in the International Markets, Trading Broker of OTC Derivatives and Currencies in the Spot Market, Financial Products Dealer) and Category 5 License No.20200000217 (Introduction). Registered Office: 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
