OTC trades, explained

Over-the-counter (OTC) trading refers to the buying and selling of securities directly between two parties — without the involvement of a centralised exchange. OTC markets are widely used for bonds, currency instruments, and structured financial products.

Key characteristics of OTC trading

OTC markets offer flexibility and accessibility, but they also carry specific risks that participants should understand:

• Trades are executed directly between counterparties, without an exchange intermediary
• Prices and terms are negotiated individually for each transaction
• Liquidity can vary significantly depending on the instrument
• Counterparty risk is higher than in exchange-traded markets

OTC vs exchange-traded: a comparison

"OTC trading supports market liquidity and the diversity of financial instruments, but it demands higher standards of transparency."

Image

The Tbilisi Stock Exchange reports OTC trades in accordance with applicable legislation, ensuring market transparency and investor protection.