In plain English
What Over-the-counter market means
In an OTC market, buyers and sellers negotiate terms bilaterally or through intermediaries instead of sending every trade to one exchange order book. Prices may still be quoted electronically, but the market is not defined by a single central matching venue. OTC trading is common in many currencies, derivatives, bonds and other instruments.
Why it matters
OTC structure affects how prices are formed, how liquidity appears, and how trades are executed and cleared. Because there is no single exchange book, transparency, execution quality, counterparty exposure, and post-trade processing can differ from exchange-traded markets. Regulation also depends on the instrument and jurisdiction.
Example
A bank quotes EUR/USD to a client over an electronic trading platform. The client accepts the quote and the trade is executed bilaterally, rather than against a public exchange order book. That is an OTC-style transaction, even though it may use electronic infrastructure.
Quick answers
Common questions
Is OTC the same as “off-exchange”?+
Often, yes in plain usage. In practice, the exact legal meaning can vary by product and jurisdiction, so it is safer to describe the venue and execution method rather than assume one universal definition.
Are OTC trades always dealer-driven?+
No. Some OTC trades are arranged directly between counterparties, while others are routed through brokers, platforms, or electronic networks that still do not function like a centralized exchange.
Sources